When it comes to modern energy, you’ll be hard-pressed to find many folks as enthusiastic as me.
Even before the modern energy bull market took off back in the early part of this century — when I was often the target of ridicule by the old guard — I held strong to my analysis. And the outcome was certainly positive.
The truth is, it was the bull market in renewable energy in particular that launched my career. So needless to say, I have a strong connection to the modern energy space.
That being said, I’m also a pretty cynical guy. I take little at face value, and I often require solid data before signing onto anything. So when I came across a recent interview with Tony Seba, an energy expert from Stanford, I was both excited and skeptical.
Overzealous Calculations?
Tony Seba may not be a household name, but to energy analysts, he’s definitely served as a source for quality analysis.
In his book Solar Trillions, Seba offers a mountain of sound analysis that has served as an excellent indicator for those who profit from the development of renewable energy. Personally, I’ve found him to be on point with just about everything and often look forward to reading his latest blog or checking out his latest PowerPoint.
However, in a recent interview with Renew Economy, he made a few calls that, I must admit, sound a bit far-fetched.
I’m not saying Seba is wrong or his analysis is faulty… although I do find it a bit overzealous.
Of course, he’s also one of the smartest guys in the room when it comes to this stuff, so as investors — even if we find his analysis to be overly optimistic — we would at least be wise to pay attention and draw our own conclusions.
Let’s take a closer look…
Obsolete!
Tony Seba has stated he believes (or at least is “incredibly optimistic”) that by 2030, oil, gas, big hydro, coal, and nuclear will be all but obsolete. He also said, “The world will be mostly powered by solar and wind, and most new vehicles will be electric.”
Now, further along in his interview, Seba makes some very valid points, particularly those that point to cost decline curves and the economic superiority of solar without subsidies. But here’s where it gets tricky…
Seba said it’s just a matter of policy makers understanding this and making regulations appropriately.
And there’s the major speed bump.
I have absolute faith that continued advances in technology will ultimately make renewable energy the most rational choice for electricity generation and, in many cases, transportation. We’ve already seen proof of this over the past ten years, where production costs have fallen dramatically for renewables and will continue to fall as we go forward.
The same cannot be said for fossil fuels. Even natural gas, despite the abundance of this bounty in the United States, will ultimately head north again.
Economic Superiority
Over the years, I have no doubt the world will not only embrace renewable energy but, in many cases, seek it out in an effort to take advantage of its economic superiority — particularly in regions where it’s already the cheapest form of electricity.
Africa is the perfect example. As Seba points out in his interview, “Solar is already cheaper than grid — what people are paying for electricity — in dozens of countries. And that is despite huge fossil fuel subsidies.”
This is all great stuff. But Seba’s thoughts on policy makers understanding the economic benefits of renewable energy and thus making appropriate regulations are what I believe will skew his very optimistic predictions.
The truth is, you can’t rely on policy makers for anything. In fact, I would argue that because of special interests running our government and the inability for most politicians to base their decisions on anything beyond what is in their best interests (not the American people), the transition to a more economically sustainable energy economy will be slower than it should be.
That doesn’t mean it won’t happen. After all, our overall energy economy, despite it being riddled with government intervention, is still inching towards something far superior than what we rely on today. And that will continue.
Still, we still have to ask, how accurate are Seba’s predictions?
Will 2030 be the decade we see renewables conquer fossil fuels? Will solar and wind really be powering most of the world? Will most new vehicles be electric?
Here’s My Take…
In 2030, renewables will make up a large portion of the world’s energy mix. Particularly in Africa, distributed solar will be very common. This will be the result of continued cost reductions in technology and the simple fact that centralized infrastructure in Africa is lacking and uneconomical to pursue.
In the United States, where the infrastructure for centralized power is already in place, it will be a longer journey. I suspect that by 2030, renewable energy sources will account for about 35 to 40% of installed operating generating capacity. Most of that growth will be non-hydro, too, with the biggest gains coming from solar.
Today, renewable energy sources account for about 16% of total installed capacity.
Western Europe, Japan, India, and Australia will continue to see massive growth in renewables. China is expected to have a significant amount of electricity generation coming from solar and wind, although it will also continue to aggressively build out its coal and nuclear mix.
As far as new cars being electric, I think it’s still too early to tell. It’s true that advanced battery chemistries and technologies are rapidly decreasing costs while improving overall performance. As well, expect to see a continuous rollout of public charging stations.
However, will that be enough to get the carmakers to pump out more electric vehicles than internal combustion vehicles by 2030? It pains me to say I don’t know.
My first instinct is to say no. But after what I’ve witnessed in the electric vehicle space over the past ten years, it would be naïve to dismiss such a prediction.
That said, the continued development of renewable energy and alternative transportation technologies will be fast. The number of wind farms, solar panels, and electric cars I see today is absolutely mind-boggling. And we’re really just out of the starting gate.
That’s not to say I’m counting fossil fuels out. In fact, I continue to profit from oversold coal plays and the domestic oil and gas boom that’s well underway. But I’m telling you right now, if it’s growth you’re looking for, then you need to have some exposure to renewables.
In the meantime, consider that even if Seba’s predictions fall short by ten or twenty years, we’re all still in for a long, profitable run on renewables. And I, for one, won’t be on the sidelines. You shouldn’t be either.
To a new way of life and a new generation of wealth…
Jeff Siegel
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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.
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