Let the sunshine in, let the sunshine, the sunshine in. Oh let it shine, c'mon. Now everbody just sing along....I recommend blasting this song if you ever need a pick-me-up. It’s almost as good as a cup of coffee.
I have been following the alternative energy space closely over the past decade. It has certainly had it's share of ups and downs, but it now seems to be on a trajectory that is very promising. I'm excited about the implications, especially, since I have two young kids and enjoy breathing clean air!
One trillion and counting
The world is awash in free energy. One hour of sunshine hitting the Earth contains enough energy to power civilization for an entire year! The trick is figuring out how to capture this energy. Humans are getting better at this every single year. According to Bloomberg Energy, the world recently hit one trillion watts of energy being generated from wind and solar power.
“One trillion watts” may not mean much to you, so here’s a little perspective. As of 2016, the world had approximately 6.2 trillion watts of installed power capacity. That means we’re already 16% of the way to reaching full power with alternatives.
It took the world decades for solar and wind to reach one trillion watts, but experts believe we will hit the two-trillion-watt mark in five years or sooner. If this trend continues, we could see the majority of our electricity powered by the sun and wind by 2030. This thing has a name: It’s called exponential growth.
The Giant Fusion Reactor in the Sky
You may not realize it, but right now, you’re indirectly using the sun to power everything in your life. Fossil fuels are basically just an indirect way of using sunlight that has been stored for millions of years in the earth. It’s dug out of the ground, refined, and crudely burned, releasing an abundance of carbon dioxide and poisons into the air.
Now, the world is moving away from dirty fossil fuels and toward an era of cheap energy, which has major implications for the global economy and the stock market over the next decade. The impact will be felt everywhere from your local gas station, to oil-dependent economies, all the way to your investment portfolio. The funny thing is that most people don’t realize this is happening. Conventional wisdom hasn’t kept up with the facts on the ground.
Solar and Wind are everywhere
Most people think that they aren’t using solar power if they don’t have panels on their house, but this is no longer true. Utilities are beginning to find that it’s much cheaper to use solar and wind than to burn fossil fuels. Major Fortune 500 companies have realized that using alternative energy is an easy way to save money and look good doing it.
Unfortunately, Trump wants to protect the coal and fossil fuel industries, but even his administration can’t buck the power of the free market. It's hard not to find the irony here. In the past, solar energy had to be deeply subsidized for it to be cost-competitive, but this is no longer the case. In fact, in most places, it’s cheaper to build a solar farm than it is to build a coal or oil refinery.
The Next Amazon
How does this impact you? How can you take advantage of this trend and the continuing disruption? My take is that the alternative-energy-party is just getting started. Solar and other alternatives remind me of tech companies in the late 80s and 90s.
I don’t know who the next Microsoft or Amazon is going to be in the solar industry, but I’m willing to bet there could be some soon-to-be-valuable companies on the tip of the spear leading this disruption. If I were an investment newsletter, I would tell you to subscribe to find out which stocks to buy.
Sustainable Investing is a Win-Win
My clients and I are focused on making money and investing in a better world at the same time. I view this as a major win-win. I view every dollar going into an oil company stock as a missed opportunity. If you own mutual funds or the S&P 500 index, then you’re supporting the likes of Exxon Mobil and other fossil fuel companies that have misrepresented the truth about global warming and climate change to the public.
Follow the Puck
Investing is like hockey. You don’t want to go where the puck was; you want to be where it’s going. It's also not a great idea to invest in areas that governments and companies are actively trying to disrupt. California, the world's sixth-largest economy, just recently passed a bill that sets a target of 100% renewal energy by 2040. Many countries in Europe have similarly ambitious plans.
Other reasons to divest from fossil fuel companies are that you will live a more intentional life and end your indirect support of oil oligarchies like Russia that have waged war against our democracy. By taking money out of fossil fuel companies, you help to defang some of the most corrupt and evil dictators the world has known. Read: Five Reasons to Divest from Fossil Fuel Companies.
The Resource Curse
You would think that countries with lots of oil would be doing well, but it’s actually the opposite. Look up the term "resource curse," and you'll see what I mean. Natural resources worth billions and, in some cases, trillions of dollars lead to major, major corruption. Venezuela is a textbook example.
And even if you don’t believe the mountain of evidence and facts that climate change is real, you should want to divest from fossil fuel companies simply because you don’t want your good money chasing a bad investment.
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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Patrick Dinan, and all rights are reserved.