In recent years, the price of oil has been climbing higher. I read an article about how new technologies in alternative energy are becoming cost effective and will increasingly replace our dependence on fossil fuels. What kind of technologies are being developed and is there any way that I could invest in them?

It is certainly true that if the price of fossil fuels, such as oil and natural gas, become more expensive, alternative energies will become more widespread and efficient.

The earth has taken millions of years to form fossil fuels and, with a growing world population and higher standards of living, economists predict that we will deplete fossil fuels as soon as this century. Currently, there are a number of new technologies being developed to make us independent from these finite resources:

1. Ethanol is produced mainly from corn or sugar and is used as transportation fuel to reduce harmful exhaust emissions from vehicles. When used as a transportation fuel, ethanol is referred to as E85, which is an alcohol fuel comprised of 85 per cent ethanol and 15 per cent petrol. Brazil is the world leader with a utilisation rate of 40 per cent ethanol, used nationwide by its vehicles.

2. Biodiesel is a clean burning renewable fuel produced from domestic sources such as soya beans, fat or used vegetable oils. It is blended with diesel fuel as it is biodegradable and non toxic, and actually extends engine life because of its superior lubricating properties. EU biodiesel capacity is expected to jump by 50 per cent to some 6 million tons by the end of 2007.

3. Hydrogen will play an important part in developing sustainable transportation worldwide because it can be produced in virtually unlimited quantities. Hydrogen has been used effectively in a number of internal combustion engines as pure hydrogen mixed with gas. Best of all, the only emissions it produces is water! Development of this technology is still in its infancy.

4. Solar technologies use thermal panels or photovoltaic cells. Solar thermal panels trap the sun's heat and convert it into energy. Solar photovoltaic cells convert sunlight directly into electricity. Denmark currently subsidies 30 per cent of the cost of purchasing solar systems by its citizens. California will spend $2.9 billion in rebates over the next 10 years to increase the solar capacity installed on rooftops in the state by 3,000 megawatts.

5. Wind energy is used for practical purposes, like generating electricity, charging batteries and pumping water. Strong winds cause wind turbines to rotate, providing electricity for the power grid. Wind energy plants produce no air pollutants or greenhouse gases and the cost of the technology has dropped by 85 per cent over the past 20 years. Germany is the world leader, producing 18,440 megawatts of wind power every year.

6. Hydropower is a technique that uses the river, sea or ocean to turn turbines to generate electricity. Today, hydropower facilities in the United States can generate enough power to supply 28 million households with electricity. The world's largest hydropower project, China's Three Gorges Dam, will create as much electricity as 18 nuclear plants!

7. Geothermal energy is thermal heat derived from the earth. This can be used to heat buildings, industrial processes, greenhouses and aquaculture. Current US geothermal electric power generation totals 2,200 megawatts or the equivalent of four large nuclear power plants.

8. Waste-to-energy facilities produce clean, renewable energy through the combustion of municipal solid waste. Trash volume is reduced by 90 per cent and the residue can be deposited into landfills. It costs more to generate electricity in a waste-to-energy plant than it does at a coal, nuclear or hydropower plant, but it reduces the amount of garbage we deposit in landfills!

From an investment perspective, while there are companies that specialise in each technology sector, over the medium- to long-term not all of them will become market leaders.

Instead, you may wish to consider collective investment funds managed by leading international fund management groups that invest in new energy technology. Such professional fund managers will actively manage the fund by buying and selling shares in different companies according to market conditions and technological innovation.

Their expertise will help to maximise returns in a favourable market environment while controlling any losses when the market goes down. Importantly, you can sell your holdings in these funds on a daily basis, allowing you a very high level of liquidity when looking to take profit.

Mark Hollingsworth is the director of Hollingsworth International Financial Services - licensed by the MFSA to provide investment services under the Investment Services Act 1994 (IS/32457). Address any financial questions to: Mark Hollingsworth, c/o The Sunday Times, PO Box 328, Valletta CMR 01. Alternatively, he can be contacted on 2131-6298/9984-2614 or e-mail mh@hollingsworth-int.com.

Past performance is no guide to the future and, except where amounts are guaranteed, the price of your investments (and the currency in which it is denominated) may fall as well as rise. Your personal tax situation will depend on residence. Always consult a professional adviser. This article does not intend to give investment advice and its contents should not be construed as such. Readers are encouraged to seek professional advice on their personal financial situation.

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