Efficiency in Energy Stocks

I’m a data hog.

It helps me make decisions based on real historical occurrences by finding trends, patterns, and outliers.

When dealing with stocks, I use data to find price ranges so I can advise readers when to buy low and sell high. If you get good enough, you don’t even really need to know that much about a company — some volume numbers and a historical price chart will do just fine.

My readers closed dozens of stocks like that last year. Of course, we also find undiscovered stocks based on intense research of emerging technologies, long-term energy trends, earnings analysis and so on… but I digress.

I also use data to make personal decisions, which I then extrapolate to real-world happenings. This also helps me make investment decisions.

At the start of this New Year, I have some fresh full-year data, and some interesting conclusions to share.

My Gasoline Use

Last year, I drove 12,707.5 miles. I used 871.69 gallons of gas. I got 14.58 miles per gallon (MPG).

I spent a total of $1,947.18 on gasoline, paying anywhere from $1.48 per gallon (in January) to $2.74 (in December). The price constantly rose all year, but the average I paid for gas in 2009 was $2.23.

Here’s all that data again, compared with my numbers from 2008.

The main takeaway here is that I used 155.98 more gallons of gas in 2009 than I did in 2008. But I spent $238.29 less.

I guess what I’m trying to say is, when it comes to gas use, we’re pretty much at the mercy of the market, since prices can swing so drastically. I mean, the average price last year was $0.86 lower than two years ago.

As a country, we didn’t have to do anything and we saved money. It’s easy to see why you wouldn’t want to by a new car just to save a few miles per gallon.

My car is paid off. Why would I pay $26,000 for a new one, even if my mileage doubled? So I could get 30 mpg and use just 423 gallons, paying $944.55 instead of $1,947.18?

I’d save $1,002 in gas costs, but I’d have to pick up a few-hundred-dollar monthly car payment. Plus, my gas costs would go right back to where they were when the price goes back to $3.50 per gallon.

No thanks.

My Home Energy Use

My home consumed a total of 10,834 kWh of electricity and 611 Therms of natural gas. I paid a total of $2,346.30 for those services.

But as you’ll see in the chart below, I used 54% less electricity in December than I did in January, and 64% less natural gas. As a result, my bill was $145.62 versus $358.12. Check it out:

Now, I did a few things to reduce my home energy consumption this year. That’s the reason for the constant decline in my bill.

First of all, I signed up for my local utility’s energy efficiency program, Baltimore Gas & Electric’s Smart Energy Savers. At no cost to me, they came out and installed a smart switch, made by Honeywell, on my outside air-conditioning unit. This allowed them to cycle my unit during days of peak demand in the summer.

Joining this program also entitled me to an $18.75 credit on my bill for the summer months of June through September.

All this, and I haven’t spent a penny.

Thanks to utility deregulation in Maryland, I also signed up for electric supply service from Washington Gas Energy Services. That allowed me to lock-in a competitive rate of $0.108 per kWh instead of the $0.12 per kWh (or more) that BGE was charging. I was also guaranteed 5% wind energy.

Finally, I took some personal efficiency steps. I installed a smart thermostat and programmed efficient settings; I installed CFLs; I bought a tube of caulk and sealed windows, doors, and cracks; and I put a space heater in the bedroom so I could set the heat lower at night.

All this set me back about $200. But as you can see, my bills in the second half of the year were half us much as bills prior, saving me hundreds of dollars. And that will continue for years.

And that’s the point I’d like to make here: When it comes to efficiency, making small changes at home has a much greater net benefit than make big changes to your car.

The Fifth Fuel

This is why building energy efficiency is now being referred to as the fifth fuel — after coal, oil, gas, and uranium.

And it’s spawning an industry worth at least hundreds of billions of dollars.

I spent $200 last year on energy efficiency… There are 120 million homes in the United States… That’s $24 billion right there.

Think of the global scale.

And that’s without mentioning commercial buildings, of which there are 5 million in the States. These will cost even more to retrofit — call it $5,000 apiece. That’s another $25 billion.

And based on my little experiment, we know these investments will be made because the payoff is worth it, even before figuring in the massive government incentives now on the table.

It’s already translating into great gains on the Street. Take a look at the 2009 performance of two efficient lighting companies, a saved energy aggregator, and smart meter provider:

Some of those companies crested 500% for the year… and only a fraction of buildings have begun to be retrofitted.

I expect this to be a major investment theme again this year. And all of those companies in the chart are still on the table.

But there’s one company out there offering an energy efficiency solution that blows all others away. They make a tiny device that reduces energy waste throughout an entire building. We installed it here in the office and immediately saved about 50% per month on our utility bills.

And the stock trades for less than a dollar.

I’ve just finished my due diligence and you can find all the profitable details in this new report.

Call it like you see it,

Nick