electricity costs

The Next Energy Revolution is Here!

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Back in 2017, we wrote about two trends that would interact to change the world. Declining costs of solar power generation, combined with declining costs of battery storage, would herald an energy revolution.

In a recent article, Bloomberg News suggests that solar and wind energy is more economical to build than coal or gas plants in two thirds of the world. Five years ago, this wasn’t the case anywhere.

New sources of energy have heralded remarkable periods of growth and prosperity in the past. Water and steam brought us into the modern era more than two centuries ago. Coal and petroleum pushed development beyond what anyone could have predicted, before their use became widespread.

The next energy revolution, solar and wind plus battery storage, will bring massive new opportunities – and threats to older technologies. We are thinking about ramifications for investors.

1. The demand for copper may rise, against a constrained supply.
2. Underdeveloped areas of the world may develop faster, since solar can be deployed on much smaller scales than big central generating plants using fossil fuels.
3. Cheaper electricity may encourage new uses, not yet dreamed of.
4. Incumbent electric utilities may find themselves with stranded assets in the form of obsolete plants and equipment.

No guarantees on any part of the future, of course. But it does seem to be unfolding as we expected a couple years ago.

Clients, if you would like to talk about this or anything else, please email us or call.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

Coal Museum is Powered by What?

© Can Stock Photo / eunika

In the heart of Kentucky coal country is Harlan County. There you will find the Kentucky Coal Mining Museum. Thousands of artifacts depict the industry, the people connected with it, and the role coal played through history. Notably, the collection of Loretta Lynn, “The Coal Miner’s Daughter,” occupies a floor.

Over 90% of the coal used in the US is for the production of electricity1. The museum had electric bills that were running $2,100 per month, on average2.

In 2017 the museum acted to reduce its cost of electricity by $8,000 to $10,000 per year2. Solar panels went on the roof. The museum will be able to offset its power costs by selling excess electricity back to the local utility.

One might guess that alternative energy sources which compete with coal would not be popular in the very heart of coal country. But compelling economics usually triumph in the end. The museum made a business decision. Investors should pay attention.

The cost of electricity from solar is declining about 10% per year3. We concluded from this trend that the next energy revolution is taking shape. The combination of solar plus batteries may be the dominant source of electricity at some point in the future.

Change produces winners and losers. Our portfolios are already being shaped by the energy revolution. Many more opportunities and threats will become apparent as the future unfolds.

Our sense is that the pace of change is not fully appreciated by consensus wisdom. Some of the losers in the energy revolution may now be overpriced; some of the winners may be bargains. We are studying this situation intensely.

Clients, if you would like to discuss this or anything else on your agenda, please email us or call.

1Institute for Energy Research, https://instituteforenergyresearch.org/ Accessed on January 30, 2018.

2Washington Post, “Kentucky Coal Mining Museum in Harlan County switches to solar power”. April 6, 2017.

3The Guardian, “Solar panel costs predicted to fall 10% a year”. January 1, 2016.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.