Less than a year ago, the dawn of a new age of green energy seemed to be at hand. Oil prices were climbing to a peak of $140 a barrel. Climate change was embedded deeply in the popular consciousness, and companies and countries all over the world were accelerating efforts to create a lower-carbon society. In the U.S., consumption of solar energy had grown by more than 11 percent in 2007 and wind by more than 20 percent.

In the ensuing months, however, the world has suffered one of the great financial collapses in modern history, and oil prices have plummeted from their dizzying heights to as low as $35 a barrel. Stocks of green energy companies have been severely battered, as the widely-followed WilderHill Clean Energy Index fell by a whopping 70 percent in 2008, terrible even when compared to the dismal 38.5 percent fall of the bellwether S&P 500 index. Funding for some renewable energy projects has dried up, and some people now question green energy’s staying power.

But despite this economic gloom, 2008 was one of the best years on record for renewable energy — in terms of policy progress in the U.S. — and 2009 has continued that trend. Barack Obama was elected on a platform promising a transformation of the nation’s environmental and energy policies.

The stimulus bill passed in 2008 provided support to the growth of clean and efficient energy for years to come, and introduced the concept of improving building efficiency as a source of green jobs, both themes continued and expanded in 2009’s stimulus plan. Obama and Congress are committed to devoting more than $150 billion in the coming decade to developing alternative energy sources and vastly improving energy efficiency.

Incredible growth opportunities. Unprecedented economic misfortune. In the face of such powerful and conflicting forces, the question remains: Can the growth in green energy continue?

To answer this question, we started by looking backwards, and challenging some core beliefs and assumptions that we have long held about the growth of green energy. And despite the current economic morass, we find our bullish assumptions on green energy unchanged — indeed, even strengthened. Our conviction is based, in part, on five basic trends that have been building in recent years.

1. Energy consumption will continue to grow.

Current economic conditions have resulted in many industries grinding to a halt, reducing their demand for energy. However, despite lowering its short-term growth projections for energy demand, the International Energy Agency (IEA) still predicts continued long-term growth in every imaginable scenario, with its base case forecasting a 45 percent increase in worldwide energy consumption by 2030. Even in scenarios that factor in a price being levied on carbon emissions (translating into significantly higher energy prices), demand for energy still grows. In one scenario where carbon is priced at a lofty $90 per ton in 2030, the IEA still predicts 1.2 percent annual demand growth. Factors such as population growth and income growth in developing countries mean that energy demand is likely to be extremely inelastic in the future — so long-term growth is expected to continue.

2. The marginal cost of new oil production is rising over time.

Estimates of marginal production costs are highly location-dependent and therefore hard to generalize. Many new production sites, such as the Canadian tar sands, various deep sea wells, and Arctic sites newly accessible to exploration (accessible, ironically, because of Arctic melting that is widely attributed to global warming), are more complex and difficult to access than historic ones, requiring much greater investment. Chevron’s Vice Chairman Peter Robertson, for example, has predicted that the cost of new production in the Gulf of Mexico’s deepwater sites could exceed $95 a barrel.

We are currently seeing the effects of the high costs of drilling for new oil: Many of the exotic new projects were suspended or cancelled as oil prices dropped in the second half of 2008. As the global economy recovers, oil demand will increase again, leading to another cycle of oil price volatility and a resumption of new, and more expensive, production.

3. Green energy technologies are improving in terms of both cost and capabilities.

Green energy technologies are undergoing a rapid improvement both in performance and in the costs of production. As manufacturing becomes more advanced and industry volumes grow, the cost per unit of renewable energy is steadily dropping. At the same time, the price of standard electricity from the grid has been increasing; according to the Energy Information Administration (EIA), the retail cost of electricity for consumers actually increased 20 percent between January 2006 and November 2008 (the latest data available), a fact often lost amid the news about falling oil prices.

As the costs of traditional and renewable electricity are converging, we are nearing the holy grail of renewable energy — “grid parity,” the point where the costs of producing renewable energy and the costs of traditional, carbon-based energy become equal. According to Ernst & Young’s estimates of the price of solar electricity, solar has already achieved grid parity with the help of subsidies in New Jersey, California, Massachusetts, North Carolina, and Connecticut, and without subsidies in Hawaii. Once we reach the point where there’s no difference in price between “green” and “brown” electricity, adoption of green energy will happen on a massive scale.

4. Increasingly, energy is a national security issue.

No one in America wants to be overly dependent on foreign oil imports and potential disruptions in supply caused by the likes of Venezuela’s Hugo Chavez or Russia’s Vladimir Putin.

5. Momentum is building for action against climate change.

Awareness of climate change continues to grow, consensus around the need for action has solidified, and the prospects for global action on climate change continues to progress, with U.S. participation in the process finally gaining significant traction. As nations prepare for the next round of international climate negotiations in Copenhagen in December, hopes are high that the U.S. will finally be a partner, rather than an obstacle.

At home, President Obama is already ushering in a new approach to climate change and energy independence. The February stimulus bill, the American Recovery and Reinvestment Act of 2009, prominently features investments in green energy as one of the tools to restart the economy. It contains more than $20 billion for the green economy, including renewable energy and energy efficiency programs, grants, bonds and loans — a sum unimaginable even six months ago. And an energy bill containing a national minimum requirement of renewable energy is looking increasingly likely this year, as well as some kind of climate legislation during Obama’s first term. Together, these represent a major transformation of U.S. energy policy.

These five trends have been evident for some time. Yet just as important are several new developments that have come into sharper focus in recent months and more clearly indicate the direction we are now heading. These latest trends are a strong sign that a massive societal shift to cleaner energy is not some future event, but is happening right now.

* Utilities and investors are backing away from coal due to its economic and environmental risks.

Many in the U.S. are thinking twice before planning new coal-fired generation facilities – and investors are thinking twice before investing in them. One of the drivers for this slowdown is uncertainty regarding regulations. As Lisa Jackson settles in as the Environmental Protection Agency administrator, she is revisiting many of the decisions made by the Bush administration. For example, the EPA is widely expected to rule soon that carbon dioxide and other greenhouse gases are harmful to human health and therefore can be regulated under the Clean Air Act. Such a ruling will undoubtedly make reliance on coal-fired power plants an even less attractive option in the future.

Questions about climate regulation and the future cost of greenhouse gas emissions have shifted from “if” to “when,” even as details have yet to be agreed upon. In the absence of concrete information, some investors are beginning to factor in a price for carbon on their own. For example, Bank of America’s Chairman and CEO Ken Lewis has stated that the bank is now factoring carbon pricing into risk and underwriting models, estimating the price of carbon at $20-$40 per ton.

This regulatory and pricing uncertainty, coupled with the current drop in energy demand, is causing utilities to rethink plans to invest in new coal-fired generating capacity. In January 2009, the developers of a coal-fired power plant in Montana abandoned a project they had already sunk $44 million — and five years — into, claiming that the 250-megawatt proposal “just simply cannot be accomplished” given the current “aura of uncertainty” surrounding coal-fired power.

* Renewables are financeable. At the same time that fossil fuels, such as coal, are becoming less attractive, renewable energy sources — such as solar and geothermal power — are becoming more attractive. Even in this dismal economic climate, solid projects are being funded and completed, and proving their effectiveness.

February’s stimulus bill contains myriad funding sources for green energy projects, including tax incentives, loan guarantees and direct credits. Dollars from these programs are beginning to flow; in mid-March, Energy Secretary Steven Chu announced the first loan guarantees for green energy were beginning to be released.

* Detroit is counting on green. After years of losing market share and making inefficient cars that American consumers increasingly didn’t want, it seems that domestic car companies are at last committed to going green. The near-collapse of Detroit’s auto industry, the federal bailout of General Motors and Chrysler, and the insistence of the Obama administration and Congress that Detroit start producing hybrids, electric vehicles, and far more fuel-efficient cars — all signal that a major change is finally at hand.

* Green isn’t just about the environment anymore. One of the most heartening developments over the last few months has been the transformation of green energy from an environmental interest to an economic and national security interest. Previously, solar panels and wind turbines were viewed only as tools to fight climate change. Now, however, they are viewed as tools for job growth and economic recovery, and President Obama has made room for green energy and climate change in his budget, even including revenues from a cap-and-trade carbon regulation.

Given this heady combination of factors, we believe that growth in green energy and clean technology will continue for many years to come. The dangers of a fossil fuel-driven world are enormous; climate change and other environmental hazards are real and growing threats to our survival. Our collective awareness of these problems and our drive to tackle them head-on have reached critical mass around the world. And the primary solutions to the problems — renewable energy sources and efficiency technologies — are becoming more effective, more scalable, and less expensive by the day.

The time for the green energy revolution is now. The current recession may slow down its progress, but forward movement seems inevitable.

Reprinted with permission from Yale Environment 360.

Jackson Robinson is president and founder of Winslow Management, a Boston-based investment advisory firm that specializes in green investing, including organic food production and renewable energy. Elizabeth Levy is Winslow's senior environmental analyst.