CAMBRIDGE, Mass.--Rising energy demand worldwide and environmental concerns have made investments in energy technologies the most compelling in decades, General Electric CEO Jeffrey Immelt says.
Immelt was the keynote speaker on Saturday at the Massachusetts Institute of Technology's Energy 2.0 Conference, where he asserted that the energy industry is becoming more diverse because of improving economics and societal changes.
He also detailed the strategy behind the industrial giant's varied activities in the energy and environment area, which range from oil and gas exploration to wind power to water purification.
General Electric CEO
"We are looking at a time when technology and innovation in the energy sector can finally have a value, where innovation can be priced in a way that the industry hasn't seen in a long time," Immelt said.
He also noted that the energy industry and public policy has changed very little in the last 25 years.
That's because volatile fossil fuel prices have made long-term investments hard to finance. Also, there has been a "societal expectation that (energy) is a God-given right," making it difficult for the market to put a value on it, he said.
But that dynamic has been changing, Immelt argued. A forecast for consistently high demand, particularly from India and China, means that energy prices will stay high in the coming decades, giving corporations and entrepreneurs a more sound basis for investments.
"There's every reason to think that the world really has changed and that the investment horizon...is a different one today, where market signals (indicate) you might get a return for the risk you take," he said.
Another significant change is people's view toward the environment, Immelt said.
Environmentalism as the norm
Environmental advocacy used to be done on the fringes, often in conflict with corporations and governments. Now, there is interest in conserving natural resources among businesses, citizens and politicians of all parties, he said.
"Environmental thinking is no longer the purview of isolated, far-left thought. It is now a mainstream economic discussion. It is pervasive in almost every country in the world," Immelt said.
GE's environmental technologies are perhaps the most high-profile example of a growing boom in alternative energies and so-called green technologies.
Its Ecomagination initiative, launched in 2005 under Immelt's direction, aims to capitalize on environmental problems. Activities touch on everything from specialized materials for solar cells to more energy-efficient home appliances and train engines.
The results of Ecomagination so far have been "amazing," he said. The company has been able to lower its greenhouse gas emissions 1 percent for the last few years, employees feel engaged in the effort, and the company is on track to increase its revenue in this sector by 10 percent yearly for decades, he said.
The initiative stemmed from a review in 2004 in which the company spoke to 500 customers and saw a great deal of interest in environmental investments, Immelt said.
"The conclusion we came to is that global warming is a fact. We are very dispassionate about it," Immelt said.
Until now, technologies to address global warming and other environmental problems have been "by and large, lazy," he added.
Financial stake in renewable energy
GE's revenue from renewable energy--wind, solar and biomass--will be $7 billion in 2007. Five years ago, when it began ramping up investments, revenue was $5 million. Research and development dedicated to energy overall is about $2.5 billion per year.
Even with GE's financial stake in renewable energy, Immelt said that the company continues to invest in fossil fuel-related equipment with the potential to be used at a large scale worldwide.
"Hydrocarbons will be the dominant fuel source for the next 50 years," he said. "We are going to our installed base to try to make technologies around hydrocarbons more efficient, more effective and more pervasive."
GE makes $20 billion a year in power generation and $7 billion a year in exploration.
The company is making big bets in coal gasification--the process of converting coal to synthetic gas, which should burn cleaner--and the modernization of nuclear power plants.
Coal is highly polluting but is relatively abundant worldwide and entrenched in the power generation industry. As a result, Immelt said, GE is investing in gasification and sequestration--the process of storing carbon dioxide from burned coal underground or underwater.
Immelt said GE is expecting that greenhouse gas emissions, which includes carbon dioxide, will become regulated. The company was a founding member of United Climate Action Partnership, an organization of corporations and environmental groups calling for federal policies to restrict greenhouse gas emissions.
GE's portfolio approach of investing in several energy technologies mirrors the changing energy investment picture overall, Immelt said.
"If I had to bet on one fuel source, I don't know what I'd do. I'd be frozen," he said. "The fact is that capitalism and entrepreneurialism will solve these societal problems."