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The Battle Of Energy - Renewables Will Emerge

Summary

Oil and gas are our staple resources but aren't a permanent solution to energy needs.

Renewables are necessary for the sustainability of future energy consumption levels and the health of our planet.

Investment opportunities are abundant but we will focus on two within solar and wind.

The importance of renewables for future energy consumption provides high-growth opportunity for those positioned as market leaders.

The Thesis

Of all of the things I hold most dear in this world, it is, in fact, the world itself. It lives and breathes just the same as we do in our short lives on it. Fossil fuels pollute our atmosphere, yet are a staple resource in our global infrastructure. We wage wars over it, stockpile it out of fear and rank its importance alongside food, water, and air. However, is it worth the value if it pollutes that food, water, and air? If a quarter of these vital resources can destroy the other three, shouldn't the minority be removed to save the majority? We've come a long way in recent years to allow for a hasty transition into renewables and this article is meant to offer logic behind a new era of energy investing. Now in addition to potential stock appreciation, your investments will be for a virtuous cause.

The Landscape

According to the U.S. Energy Information Administration the United States consumed nearly 11,000 kilowatt-hours (kWh) of electricity per capita in 2015. Since 1971, our per capita kWh use in the United States has increased 73% with 67% of it coming from fossil fuels, 20% from nuclear, and 13% from renewables (e.g. hydro, solar, biofuel, etc.). As our world population expands we will continue to see consumption growth but we haven't reached an aggressive renewable energy plan to date. With this rise in demand, renewable energy sources are the only option to support long-term utilization without depletion or irreparable damage.

How feasible is it to run our entire country on renewable energy? For starters, Apple (NYSE: AAPL) is powering 93% of their entire business on renewable energy. Although it is on a smaller scale, this proves the efficacy of renewables ability to meet today's demand on a commercial level. Germany is also one of many European countries proving this on a larger scale. Bloomberg states that the country was able to power nearly 100% of its energy consumption with renewables in a given day. They're heavily weighted in wind and solar, but generate energy from a diverse set of sources including biofuels and hydroelectric. Meanwhile, states like Nevada and Arizona receive around 2.5x the annual sunlight hours than German cities.

(Source: Agora Energiewende)

Denmark broke world records in generating 42% of its electricity demand in 2015 with wind energy. This is a much safer and intelligent way of producing energy than the risks associated with offshore drilling. Disasters like the BP (NYSE: BP) oil spill of 2010 harmed habitats, livelihoods, and budgets. Fortune estimates BP has paid out a total of $56 billion since the spill, including $1 billion coming from a recent court ruling to pay local businesses impacted. Finally, hydroelectric is one of the cheapest sources of energy, powering nearly 100% of Norway's electricity needs. In some cases, their hydroelectric plants produce more power than nuclear, and after the Fukushima tragedy, we should be evaluating nuclear's risk versus reward profile. Some states in the U.S. are showing more success with renewables than others. For instance, Washington state is powering 30% of the nations net hydroelectric power.

These are important examples when considering the future of energy investing. The collapse in...


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