GREEN energy companies are riding high after George Bush endorsed alternative fuels as a way of reducing America’s dependence on oil in a speech earlier this month.

Renewable energy stocks were soaring even before the US president’s State of the Union address.

The sector as a whole has risen 41% in the past three months. Clipper Wind Power, which is listed on London’s Alternative Investment Market (AIM), has jumped 94% to 349p since the end of November.

Mike Appleby, an energy analyst at Norwich Union, the insurer, said: “Bush’s address has been the catalyst for a big rally in renewable energy stocks. Any companies that sell into the US are at, or close to, an all-time peak at the moment.”

And the US is not the only country that has pledged to increase the use of alternative energy sources.

Britain, for example, is committed to generating 10% of its electricity from renewable sources by 2012, while the Swedish government last week announced plans to try to wean the country off oil completely within 15 years.

Governments are pinning their hopes on biofuels — fuels derived from plants, such as bio-ethanol from sugar beet — to reduce oil dependency. The European Union wants 5.75% of all transportation to be powered by biofuels by 2010.

The prices of the foodstuffs used in biofuel production, such as sugar, rice and rapeseed, have also soared as a result. Sugar has jumped close to 50% this year alone — although this increases the risk of sharp falls if there is any disappointment.

Craig Pennington of Schroders, a fund manager, said: “There are alternatives to bio-ethanol, such as cellulose bio-ethanol, which is made from food waste rather than the food product itself. If it proves viable, the price of the underlying commodities could fall.”

Nevertheless, interest in biofuels has prompted UBS, the fund group, and Diapason, a commodities-focused fund manager based in Switzerland, to launch the world’s first index of biofuel prices.

Bespoke Financial Consulting has launched a fund that tracks the Dow Jones AIG Commodity index, which includes sugar. And Barclays Capital will launch a pure agricultural-commodities fund next month.

An increasing number of private investors are also taking a punt on alternative energy companies through ethical funds such as Friends Provident Stewardship, which recently announced it now has assets of £1 billion under management.

Some are keen to ensure that their cash is used to benefit the environment, but not all the investors backing renewable energy are doing it for the planet’s sake.

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