Investors Can Predict the Winners of the Alternative Energy Race: Follow the Patents

Alternative energy innovators can be identified using patent information
Alternative energy innovators can be identified using patent information

It seems that in just the last few months, reduction of US dependence on foreign oil has moved from an occasionally discussed aspirational goal to becoming a critical public policy mandate. Indeed, there is much talk about the energy policies of both John McCain and Barack Obama, each of which focus substantially on increasing the amount of energy obtained from within the borders of the US. As an interested observer, it appears to me that the publicity associated with The Pickens Plan announced in July 2008 (which I previously wrote about here) served as a significant impetus for increased public awareness of alternative energy as a public policy concern.

There can be no doubt that the alternative energy “train has left the station” and that we will begin seeing an ever-increasing amount of corporate investment in both wind and natural gas technology. This investment will be directed toward the participants’ technology becoming critical aspects of the burgeoning alternative energy infrastructure. Of course, technology development typically results in patenting activity. To this end, in my previous post about The Pickens Plan I suggested that Mr. Pickens may have launched a “gold rush” of patenting, which will likely be followed by rampant patent litigation.

The viability of my prediction was recently augmented by Matthew Quirk’s article in the October 2008 Atlantic Magazine entitled “Blowback.” Moreover, after reading this article, I now more clearly see the direction that this patenting gold rush might take. As an IP Business Strategist (more info here: The Hutter Group), I believe the future of patenting activity related to The Pickens Plan does not center on wind turbines themselves, but rather in the technologies that do not yet exist that are critical to making Mr. Pickens’ alternative energy dream possible.

Mr. Quirk’s article generally criticizes the use of wind power for as a fundamental component of US energy policy. A substantial aspect of his criticism centers on the lack of technology currently available to allow wind power to comprise a consistent and reliable source of US power. Mr. Quirk asserts that “there are many kinks left to be worked out.” This criticism provides an outline of technology development that must occur for The Pickens Plan to work.

I am not an energy expert by any stretch of the imagination, but reading between the lines of this Atlantic article’s criticism of The Pickens Plan, as well as the outlines of the related CNG Now program, at least the following issues must be successfully addressed for wind and natural gas to become viable alternative energy sources in the US:

  • Improved means to store electricity formed by wind at times of low use by the public
  • Efficient and low-impact ways to ramp up and power down power plants
  • Better ways to transmit power over long distances without substantial degradation
  • Improved methods to efficiently deliver and safely store natural gas for broad use by the public

Solutions to these problems will no doubt give rise to patentable technology and those entities investing in these solutions will seek to protect their investments by obtaining the exclusive rights afforded by patents. I believe that such patenting activity could operate as a primary source of firm value for those companies that are seeking to capitalize on The Pickens Plan’s implementation. Moreover, investors hoping to select companies with technology likely to form a foundation of the alternative energy infrastructure can predict the winners by using patent filing information to inform their investment decisions.

Regular readers of this blog will recognize that investment decisions can be greatly improved (that is, made more “reality based”) by analysis of patent filing information. When properly collected and analyzed, patent filing information will provide insights into the viability of technology and the value of companies that own such patented technology. The technology associated with The Pickens Plan is no different: if you want to predict the winners in the alternative energy game, follow the patents.

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