We are at an historic junction of human history in which we are transitioning from the age of fossil fuels to the age of renewables and distributed energy, in effect a true paradigm shift. The tide has turned and the worldwide momentum is irreversible. This change is occurring all around the world and has been accelerating dramatically in the last 3 years.
One of the most critical factors in this accelerated transition is plain and simple, yet financially compelling – economics! Strangely this is seldom highlighted in most articles.
Renewables are in fact cheaper than all forms of fossil fuels, especially when you compare all of the relevant factors – initial cost, timing of cash flows (cost of money), absence of variable costs for decades, superior job creation, no pollution, no huge resultant cleanup costs and few if any health related costs. Note: solar’s cost is far lower than the chart below and dropping annually.
The truly interesting and significant dichotomy in this transition is that, at this time the greatest threat mankind has every faced – Climate Change, is upon us and must be addressed immediately and at the same time, Climate Change also presents us with the greatest investment opportunity of all time!
Climate Change must be addressed, and by far the fastest and cheapest way to address it is with existing renewable technologies – solar, wind, biomass and working together connected to batteries when needed and distributed energy networks that are far more flexible, extremely resistant to disruption (storms, terrorism) and have a significantly higher proven reliability.
The investment areas include: solar, wind, batteries, electric cars, fuel cells and micro grid related companies which are just starting to appear and present themselves, and many more will arise as the transition accelerates.
It is important for the investor to understand that humans tend to think linearly (pretty much straight), whereas innovation and paradigm shifts are never linea, they are always in an S-curve type of acceleration when it moves along on a slight incline (the decades of the change) and then takes off sometimes almost vertically. That is one of the reasons investors generally miss the inflection point where the innovation or paradigm shift starts its dramatic acceleration.
It will be the savvy and aware investors and corporations that will take advantage of this. Now that the economics are much more obvious, this will spark the investment community and they will further accelerate the transition. It will become increasingly difficult to ignore the superior financial numbers of renewables and in the end, the best investment for investors and for the planet will be the same – renewables.
You may hear about or read about how expensive it will be for the transition to renewables and yes it will be very expensive, but it is magnitudes cheaper than repairing old and decrepit infrastructure and building new power plants that are actually obsolete before they are built and will end up as worthless stranded assets. The longer we wait, the higher the cost to address the problem will be.
The time is NOW.
We need to combat Climate Change in the fastest and cheapest way, which is with solar and other renewables. In addition to being the fastest and cheapest, it is also clearly the “greatest investment in the history of humanity”.
It is a no loss action in which everyone benefits.
Why are renewables the Greatest Investment Opportunity in History?
Renewables will be a great and transformative investment because they have all the key characteristics of a great investment. They are simply: Better, Faster and Cheaper!
Better – it is clean energy, the only truly abundant energy source, available everywhere, has far less financial risk and is the only energy source that strengthens rather than weakens national security.
Faster – solar scales up as much as 15 times faster than nuclear or fossil fuel plants. There is simply no financial comparison when it comes to speed of building and the time value of money involved. (Money tied up in a project than takes many years( 5-10) verses one that is built in 12 to 15 months months.
Cheaper – solar is cheaper NOW, due to recent dramatic decreases in price (62% for wind and 82% for solar) in the past 3- 5 years. These decreases continued in 2020 and are projected to continue through 21-25 and beyond. Another fallacy concerning both wind and solar is that they take up too much land. As you can see below that is simply not true.
The intrinsic advantages of solar are dramatic and insurmountable
1. Solar is abundant, can be utilized in almost any size (a wrist watch to a city) and available everywhere. It is, in fact, the most “democratic” form of energy in existence.
2. Solar is renewable and is not finite as are all other fuels and it is the only source of energy that can easily supply all our long term needs. ** The energy from approximately 2 weeks of sunshine hitting the earth is greater than ALL the energy stored in existing fossil fuels.
3. Solar & Wind are the only energy generation technology’s that do not utilize (and pollute) vast amounts of fresh water. This is a overwhelming advantage that is seldom mentioned. However, it is without question, an advantage that is truly insurmountable.
4. Solar & Wind are the only energy source’s that do not create or emit carbon and further contribute to climate change.
Why Investing is different when a â€˜paradigm shiftâ€ is occurring.
One of the “old” contrary adages in stock market investing is: “this time it is different” – it is generally associated with novice investors who most of the time, lose money.
It is a true that most of the time – things are the same, but during a paradigm shift – the old rules do not apply and a unique & dramatically different playing field presents itself to investors.
It happened before when personal computers (distributed computing) supplanted main frame computers (centralized computing) and it is happening now with distributed renewable energy technologies overtaking antiquated, inefficient and costly centralized energy generation.
The risk of investing in huge power plants that have 30+ year lives when there is the distinct possibility that they could become negative cash flow nightmares quickly is simply gigantic. With efficiency improvements and solar and wind growth the electricity demand worldwide has been decreasing for the first time ever. This decrease in demand will certainly lead to dramatic decreases in revenues and almost certainly long term negative cash flows for central plants.
Likewise investing in assets (oil, coal, gas) that are in the ground also presents an unacceptable level of risk to any investor. These assets could become stranded as a result of climate change or simply because they will cost too much compared to renewables to extract. In the U.S. there has recently been significant pressure for colleges and state pension funds to divest their portfolios from investments in coal and other fossil fuels.
Over the past year the S&P 500 index (SPX) has been up 17.6% Oil ETF’s have been down 38% Solar ETF’s up 233% and Wind ETF’s 87.8%. I fact the “average” return to investors from Oil and Gas ETF’s over the PAST TEN YEARS has been -11.26%, with no year having a positive return. Why anyone would invest in fossil fuel related companies? I do not know what the investment strategy these analysts are utilitzing but it NOT the one I recommend – ” buy low and sell high”, the evidence seems to say that their investment strategy is to “buy high and ride it to ZERO”.
The end of the fossil fuel era is approaching and the trend is irreversible. It is simply another example of the capitalist process of creative destruction that has taken place in many industries over the last 100 years and has always resulted in a huge investment opportunity.
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