Oil is Dead and Renewable Energy is Killing It

Oil is Dead and Renewable Energy is Killing It

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Mark down 2015 and 2016 as special years. These two years might end up being two of the most important in the history of humankind. You might not see it yet, and that’s OK. It’s pretty easy to get preoccupied with everything else going on right now.

Take for instance the tumbling prices of commodities. You probably know what’s going on there. It’s hard to miss it. After all, the mainstream media coverage of the commodities rout is endless. Even here in Money Morning we’re covering the tumbling prices on almost a daily basis.

Come to think about, even I’ve contributed to the coverage of the shocking commodities crash.

It’s big news. It has a massive impact on the world. For the last century our world has been dependent on commodities. We’ve needed them to build, manufacture, construct, expand and grow countries and economies. We’ve been dependant on fossil fuels, oil and gas to heat the world, to help us get around, to run machinery and to feed global expansion.

Looking at oil it’s helped economies become global powerhouses. Do you think the US would be so powerful if it didn’t have major controlling interests in the oil business? Oil has created wealth on a level that you and I will never comprehend. Even if we were all multi millionaires, we’d still be billions short of the wealth of oil moguls and the oil-rich Saudi states.

Oil has been the best thing that ever happened to the world, and the worst. But the question is how long will its power and control over the world last? Can the next 100 years be oil-dependent? No. Of course not.

Like I said before, 2015 and 2016 will be historical. In another five, 10, 50 years’ time we’ll look back on today and say, ‘that was the turning point. That’s when the world changed. That was the year oil began to die.’

Something’s not right here…

The price of oil has fallen 70% from June 2014, according to Bloomberg. On Wednesday the price of Brent Crude briefly dipped below $30 to $29.96. This isn’t good news for oil dependent countries like Russia.

According to the BBC, ‘Finance minister Anton Siluanov said that the Russian budget could only be balanced at an oil price of $82 a barrel.

Looks like Russia’s going to be in trouble for a while, then.

Russia and the rest of the world are expecting that oil prices will probably stay low for a while. Maybe even for a few decades. Or maybe forever.

With bargain basement prices for oil and gas, you would think that renewable energy would be struggling along. With fossil fuels so cheap wouldn’t there be a corresponding fall in investment levels of renewable energy projects? After all, if it’s cheap to fill up at the gas pump or cheap to power your home, why bother with renewables?

Except that’s not what’s happening. With tumbling fossil fuel prices, investment in renewable energy is rising. According to Bloomberg, last year,

Renewables just finished another record-breaking year, with more money invested ($329 billion) and more capacity added (121 gigawatts) than ever before.’

There are a number of factors at play here. These factors are the evidence that prove the age of renewables is finally here.

When falling prices are a good thing

One reason, as Bloomberg touches on, is added capacity of renewable energy. Year on year, renewable energy now adds more capacity than coal, natural gas and oil combined.

And as you can see from the graph below, this capacity addition is a trend that’s only going to continue — seemingly forever.


Source: BloombergClick to enlarge

Another factor is automotive technologies. Green, clean and renewable powertrain technology is shifting the car industry as we speak. It’s no longer a matter of if green energy vehicles are coming. The question is who is going to get there first.

Every single car maker in the world is going green. And thanks to the VW emissions scandal, they’re all going to get there faster. Just last week at the Consumer Electronics Show in Las Vegas, GM unveiled a long range, affordable all electric car, the Volt.

I still get a lot of people who don’t believe in green technology. I think that’s plain ignorance. I often hear, ‘you still have to burn coal to make electricity.’ And while that might be the case now, people forget that the number of renewable energy grids going up is rising in line with the capacity growth I mention above.

That’s the crucial double-whammy here. As capacity expands, the cost of energy plummets. As people’s mindset shifts to ‘green’ energy the whole industry changes.

The third factor at play is the falling cost of green energy. From 2010 to 2015 the cost of lithium ion batteries fell 60%. This rate of decrease matches the pace solar prices are falling at.


Source: BloombergClick to enlarge

That means it’s cheaper to generate electricity from the sun. And it’s cheaper to store energy and use it through battery power. This is part of the reason why Tesla Motors [NASDAQ:TSLA] is getting heavily into battery production.

The age of renewables

The thing about renewable energy in the past is that it had come at the wrong time. The technology wasn’t good enough. The world wasn’t ready for it. After a couple false starts, those ignorant to the future of energy will always say renewable energy won’t ever reach the masses.

This viewpoint couldn’t be more wrong. Of course by 2017 we’re not going to have a world 100% powered by renewable energy. But by 2030? We’ll that’s more likely than many want to consider.

The thing is, you can keep denying it if you want. You can be pro-oil. But let me tell you this. Oil is dead my friend. And renewables are killing it.

Accept what the future holds. The age of renewables is upon us, and it might just be one of the best industries to invest in long term.

Regards,

Sam

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Sam Volkering

Sam is Editor for Money Morning and it’s small-cap and technology analyst. He spends his time hunting down the most exciting stocks on the planets, whether they’re potential-packed volatile small-caps or tech firms transforming our future through cutting-edge technologies. You can find more of Sam’s work over at Australian Small-Cap Investigator, where he shares the best small-cap stocks he finds on the ASX, or at Revolutionary Tech Investor where he reveals the latest breakthrough tech investment he’s discovered. If you’d like to more about Sam’s financial world view and investing philosophy then join him on Google+. It’s where he shares investment insight, commentary and ideas that he can’t always fit into his regular Money Morning essays.

Sam Volkering is Editor for Money Morning and its small-cap and technology analyst.

He’s not interested in boring blue-chip stocks. He’s after Australia’s rising stars — companies whose shares trade for cents on the dollar — and are often shunned by those in the financial services industry. His mission is to make you big money, from small stocks.

If you’d like to learn about the specific companies Sam is recommending you buy for turbo-charged stock returns, take a 30-day trial of his small-cap investment advisory Australian Small-Cap Investigator here.But that’s not where Sam’s talents end. From discovering the Apple 2e and Macintosh in the mid-80s, to the rise and fall of the Mini Disc in the 90s…to building internet apps in the 00s…Sam is an amazing talent at finding new, cutting edge technologies and translating that research into how the future will look — and where the opportunities lie.It’s his job to trawl the world to find, analyse, research and — in the right situation — recommend investments in the world’s most innovative and technologically advanced companies.He recommends the best ones he finds in his breakthrough technology investment service Revolutionary Tech Investor.This revolutionary investment advisory is dedicated to finding the best ways to profit from technological developments across the globe. If the best action is in Australia, Sam will find it. If it’s in Silicon Valley, Frankfurt or Tokyo, Sam will find it there too.To find out more about how Revolutionary Tech Investor can help you profit from breaking developments in the tech world click here to take a 30-day no-obligation trial today.

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Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@moneymorning.com.au