The next economic boom from the Economist.com
The power and the glory | Economist.com
I found some interesting reading over the weekend, and much of it was directed towards the renewable energy. The longish article (read it all) linked above hypothesized the next boom in investments will be in the energy field, specifically renewables. I found the short history of economic booms to be revealing and I will attempt to give a quick outline here.
The modern industrial age was driven by the increasing availability and use of different energy sources. Coal to power factories and trains, oil increased the efficiency of ship, trains and gave us the personal mobility of cars and trucks. Electricity allowed us to light and power our homes and business efficiently. Natural gas provided a clean, inexpensive source of electricity and heat.
These low cost energy sources lead to the recent technological booms: Computing in the 1980’s and the Internet in the 1990’s. Now, however, the rising cost of energy has become a cost too big to ignore and threatens global economic growth.
The point of the article is we will see a boom in renewable energy to compare with the economic booms of the past. They make a very good point on how huge the prospects for future energy needs are:
A prize beyond the dreams of avarice
The market for energy is huge. At present, the world’s population consumes about 15 terawatts of power. (A terawatt is 1,000 gigawatts, and a gigawatt is the capacity of the largest sort of coal-fired power station.) That translates into a business worth $6 trillion a year—about a tenth of the world’s economic output—according to John Doerr, a venture capitalist who is heavily involved in the industry. And by 2050, power consumption is likely to have risen to 30 terawatts.
My interest and research into renewable energy started in earnest about a year ago, and I believe this industry is still in a very early stage. The initial investing excitement has passed for sector, but the true breakthroughs are still ahead of us. In comparison, the largest oil ETF (XLE: 75.00 -1.34 -1.76%) has $5.5 billion in assets, the largest renewable energy ETF, (PBW: 19.94 +0.20 +1.01%) has $1.6 billion. Of the stocks in the respective indexes, the median market cap in XLE is $48 billion, for PBW it is $3.7 billion, putting the value of renewable stocks at a fraction of the oil companies.
I believe we do not yet know where the true renewable energy breakthroughs will come. I am referring to those technologies that will let us replace a significant portion of our carbon based energy, as the Internet has replaced the TV and newspaper as sources of news. As an investor, I currently would go with an ETF like the PowerShares Global Clean Energy Fund (PBD: 25.936 +0.386 +1.51%). This will be a boom that takes decades to fulfil it’s destiny.
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I find the silence deafening on the subject of the alternative to fossil fuels for powering big rigs (18 wheelers) and locomotives, and river barges and dry cargo ocean freighters, etc.