This segment was taped at the American Stock Exchange, which offers trading across a full range of equities, options and exchange-traded funds.

Walter Nasdeo, Director of Research at Ardour Capital, discusses where the technology and investment opportunities in alternative energy are headed.

Mike Norman, Editor, HardAssetsInvestor.com (Norman): I'm Mike Norman, founder and publisher of the Economic Contrarian Update.

Alternative energy: That's what we're going to be talking about today with Walter Nasdeo. He's managing director and director of research for Ardour Capital. Walter, thank you very much for coming here today.

Walter Nasdeo, Diretor of Research, Ardour Capital (Nasdeo): It's my pleasure, Mike.

Norman: Alternative energy sounds like an obvious theme nowadays, particularly with skyrocketing oil prices. There's got to be something more going on now. Everyone can understand the connection between high oil prices and the need to search for or find alternatives.

However, [let's] talk a little bit as well about the technology; how it's developing, and whether that is somewhat independent of the oil price trend.

Nasdeo: Well, it is. However, one of the things that I think is important to note is as oil goes up, people start looking at that and try to find out what's a good surrogate for oil. Where can we look to find other investment opportunities? And historically we're seeing them look at alternative energy.

There's not a true one-to-one correlation [between oil prices and alternative energy success]. Obviously, most of the alternative energies produce electricity, and in this country the bulk of electricity is produced by coal and has been and will be for a while. However, [the rising price of oil] certainly created an opportunity-type situation.

As far as technologies go, what we're seeing on a very large scale is development globally. There is no one true pocket as far as development goes. We're seeing a lot of solar being developed in China; there's still a lot of work being done in Europe; and of course, here in the United States, we're certainly one of the leaders in technological development [with] the next generation of things like solar thin film and concentrated solar power and things like that.

As a rule, what we're seeing is all of the areas are moving forward. As far as investments go, you look at things like how are the quarters progressing, and most all of the companies in this space have either met or exceeded expectations … this quarter especially. However, right now we're in a tough market and everybody is struggling a little bit. One of the things I think is interesting to notice is the companies are starting to develop and mature enough now that they're also starting to react to broader market signals. In the past, there was a lot of counterintuitive movement to the alternatives. The market would be up, these stocks could be down, or vice versa. Now we're starting to see the group move as the markets are moving, and I think that's a good thing because it's a sign of maturity in the space.

Norman: You mentioned solar; that's obviously one of the alternatives. What others fall into that category? There's the big push for ethanol in this country. What about the coal gasification? What are some of the others that fall into the alternative energy category?

Nasdeo: Well, you start looking at fuels and obviously at ethanol. Biodiesels are also very important.

Ethanol is an interesting area because we saw a vast run-up in that over the last 24 months. Things settled down last year; there were a number of issues because most of the ethanol producers, especially in this country, are corn-based. It's very easy to do that [make ethanol out of corn]. The problem is the price of a bushel of corn got very volatile because of the demand for the ethanol producers.

Here's the thing though, and I think it's important, because I don't think this story is really told on a broad scale: When you take a bushel of corn to make ethanol, you get about eight gallons of ethanol and you also get about 17 pounds of what's called distiller's grain. That distiller's grain is a high-protein animal feed that goes right back into the channel of distribution for animal feed. That doesn't get talked about. It's not a zero-sum game; you're not taking one bushel out and not replacing it; you're putting a lot of high-protein feed back in. The real problem is when you take corn that's produced for human consumption out … that's the problem. That's why we saw the corn prices in Mexico a year or so ago get so out of whack that the government had to cap it. That's not good.

Norman: The price of tacos was going up.

Nasdeo: [laughs] OK, but here's the thing: We're starting to see a lot more development in what's called cellulosic ethanol. The cellulose is basically a nondigestible substance: Nobody eats this, and you're seeing things like switch grass and other base fuels that are not used for anything else and ethanol is being derived from them. We're still at the early stages of development there, so in the next few years, we're going to start seeing more and more of that. Ethanol is here to stay. It's in the energy bill; currently we have a mandate for 35 billion gallons of ethanol by 2020. That may increase even, and of that, 15 billion is earmarked for corn. It's around for a long time.

Norman: You're not taking as negative a view, or at least you are accepting that's in the energy bill; it's here to stay.

There are other things that are also developing. You mentioned solar, and we're going to get into that. We're also going to get into the Ardour Capital Alternative Energy Index, and there's actually an ETF based on that. So folks, come back next week for our second segment because there's a lot more to come in my discussion with Walter Nasdeo. Stay tuned.