As an ongoing debate centers on the different benefits of renewables and fossil fuels, the presumption is that only one clear victor will emerge from this competition.
But recent trends in the wind and solar age show that this conclusion just isn’t so.
The coming energy balance will require both to work in tandem in order to achieve our sourcing goals around the world. And – as developments accelerate – it is in this “new” energy balance that individual investors will have a widening array of profit opportunities.
These days, with oil-rich countries like Saudi Arabia and the United Arab Emirates unveiling huge renewable energy projects, some analysts are drawing the wrong conclusions. But I have to stress, renewable development is not a signal these countries are running out of crude oil anytime soon.
Quite the contrary, they have realized that one side of this equation will require the other.
The same holds true in North America, where the surplus of unconventional natural gas has led some to the erroneous conclusion that wind and solar – still requiring significant government subsidies – have been dealt a fatal blow.
This is not a winner-take-all battle.
There will be no silver bullet hawking the next age of energy. Rather, it is the integration of energy sources that will comprise the next development. And that requires different sourcing from genuinely distinct and dissimilar energy categories.
In fact, three recent events provide clear indications that energy integration is the coming trend.
One of these was in the San Francisco area, where gas turbines were cranking out electricity at near capacity on one end of the bay, while a huge wind farm laid almost dormant on the other due to a lack of wind.
A second occurred in Southeast Asia. There a new battery of photovoltaic cells offset a bottleneck in the delivery of coal and natural gas to power plants.
The third was the usage of wind power in the Baltic to offset an unexpected interruption in gas deliveries on a recently completed onshore distribution spur from the new Nord Stream gas line moving under the Baltic from Russia to Germany.
Now these were three highly different events, but they certainly do not reflect a sudden change in either global energy problems or planning. What each has proven is that new trends in energy grid optimization have been accelerating over the past decade.
And this continuing trend will be the main driver in how we power our lives moving forward.
Renewables Impact Remains Limited
Here is the argument in a nutshell.
So long as we remain dependent on single energy sources for needed sectors, alternative possibilities will have little impact except on the margins. That means we require distinctly different energies that are capable of being mutually exchangeable as required.
Even if solar, wind, and geothermal will someday comprise the primary sourcing of electricity in certain regions, fossil fuels will still be required as backup. Similarly, where oil, gas, and coal remain as the essential power sources, renewables will serve in a similar secondary role.
Here is what is going to happen when this balance takes place. For the first time, the complete spectrum of energy needs will be able to factor in availability, efficiency, production/generation cost, and end-user price whenever an energy selection is made.
Availability, efficiency, cost, and price are the essential ingredients in determining the real impact energy has on economic development (or recovery). The overall scheme of energy application still places primacy on preferred energies either by region or by use. Coal is still the source of choice in Appalachia and China; meanwhile, oil still runs our vehicles.
Therefore, having a number of sources is not enough. Integrating sources is only half of the problem. We need to be able to exchange them in market use. There, transportation is still the primary shortcoming.
Natural gas is making a move to reduce dependence on gasoline and diesel. The persistence of the electric car, the end use integration created by the hybrid, the rise of biofuels, and even gasification, are all movements afoot on the vehicle fuel side.
There is still much that needs to be done for the integration to work.
But it has started.
On the power generation side, however, the expected grid moving forward will continue significant revisions already underway. The network from which we obtain electricity will undergo changes that are more dramatic over the next two decades than in the previous three or four generations. Several of the major ingredients are already in operation. With nuclear, geothermal, and even weave power thrown in for good measure, the balance prospects are encouraging.
The key in all of this remains integrating sources in an ongoing energy balance – requiring a number of different sources, exchangeable as to use and selectable as to availability, efficiency, cost, and price.
Of course, it is not simply the identification and operationalizing of the sources. We also require a multifaceted infrastructure to produce, distribute, store, and transport. This is likely to be the most expensive component of the mix.
We are witnessing the rise of new “midstream” components in many energy sectors paralleling the advent of limited partnerships in gas and oil. Each new demand of this expanding and revising energy infrastructure will also create opportunities for companies to explore new niches in the production-to-use sequence – creating new profit centers for investors along with them.
The market needs to understand that the expansion of wind farms and photoelectric fields is not a sign that oil and gas are dead. Nor is a booming shale gas basin a reason to short solar stocks.
The coming integration will establish a new way we power our lives, but it is one on which there will be ample room for sources mutually to benefit.