Energy

Investing in energy can make you a fortune

Over and over again the power over power has predicted the rise and fall of companies, countries and investors. Energy, perhaps more than any currency or commodity, determines our future.

In the early 18th century, a British entrepreneur named Matthew Boulton was called before King George III. Boulton was the Steve Jobs of 18th-century England. He was a genius – an innovator and visionary.

He was summoned by the king to answer a very simple question: what was he working on?

Boulton answered that he was working on an invention that would produce the “commodity which is the desire of kings.” Specifically, he meant “power, your majesty.”

Alongside his partner, James Watt, Boulton developed a method of turning heat into movement. He used coal to generate power with his “steam engine”.

Together, Boulton and Watt changed the fate of the world, and helped propel Britain towards a golden age of power, growth, innovation and wealth.

It was a remarkably simple formula. But it changed the world. New technology enabled us to unlock the energy stored within coal, and then use it to power the growth of our industry and empire.

At a stroke, it turned coal into a vital commodity. Luckily, Britain had huge amounts of coal. As did America. So it is no surprise that Britain and America were the driving forces behind the Industrial Revolution and the age of steam and railways. Not to mention the two richest and most powerful countries in the world.

Abundant energy and the technology to unlock it was the bedrock of economic growth for 100 years. Until a new fuel source came along. As well as the technology to harness it.

In 1913 Britain was on the brink of war with Germany. And one of our greatest political and military leaders of all time made a momentous decision.

Winston Churchill, chief of the Royal Navy, the greatest naval fighting force the world had ever seen, decided to do something both risky and disruptive. He switched the entire fleet from coal power to oil.

It was a controversial decision. Coal had been the number one energy source of the modern world for more than half a century. But Churchill understood that was changing.

Just as steam power created a huge demand for coal, a new technology created enormous demand for oil. The internal combustion engine is now a staple of our life.

History repeated itself. Technology allowed us to unlock the power stored within oil… and use it for our own purposes.

The energy world was turned on its head once again. This time, oil producing regions became rich beyond all imagining. Places like Iraq, Iran, Saudi Arabia and Texas become vital to the entire world.

Churchill was smart enough to see this in advance. He advised Parliament to purchase 51% of Anglo-Persian Oil stocks to give Britain access to Middle Eastern oil.

It was a shrewd move politically. But financially it was a masterstroke. Today we know Anglo-Persian Oil by its modern name, BP. Churchill’s stake would be worth roughly 20,000,000% more today.

That’s right. We’re talking about a 20 million per cent gain. How many other situations do you know of where that kind of return is possible?

One last example – gas. It’s closely related to oil. But it took improvements in technology to turn gas into the source of power it is today. Fracking made gas economical to extract. For efficient transport it has to be turned into liquefied natural gas (LNG) or compressed natural gas (CNG). And to get to you we need pipelines that stretch across continents.

You only need to look at the geopolitical power Russia wields in eastern Europe to realise how important gas is today. Russia controls Europe’s gas supplies and pipelines allowing it to threaten countries with a very cold winter.

In Australia a gas boom is powering along an economy that hasn’t had a recession in more than two decades. In parts of North America shale gas is turning hillbillies into millionaires.

Over and over again in the last 300 years we’ve had a breakthrough in technology which allowed us to unlock a new energy source. And these completely rewrote the rules of politics, military might, economics and investing.

Each time, understanding and anticipating that shift would have made you an absolute fortune. These days it’s particularly easy to invest in energy stocks thanks to the stockmarket.

So what are the shifts of the future?

Invest in renewable and green energy

The future belongs to renewable and green energy. Leading the pack is  the radiant energy of solar power.

Here’s a fact that must send a shiver down the spine of every Saudi sheik, Texas oilman, and everyone else connected to the oil and gas industry: humans use 410 quintillion joules (that’s 410 with 18 zeroes) of energy each year. But the Earth is hit by 430 quintillion joules of energy from the sun every single hour.

If that energy could be harnessed, that means the yearly energy needs of the entire planet – the energy provided annually by every barrel of oil, every lump of coal, every nuclear plant – could be replaced in 60 minutes. Of course that’s impossible without covering the Earth in solar panels. But it does show the enormous potential.

Spray-on solar and solar roads are the latest developments in this field. The aim is to turn the radiant energy of the sun into power more efficiently and to make solar panels cheaper and easier to locate in the right sort of place.

Whether its hydropower, solar, wind, tidal, or one of many others, they all need a place to trap the energy they generate. Or to put it another way, they need a high-end battery before they become viable sources of energy. It’s not enough to have clean power, it must be reliable too.

Battery technology is the key to renewable energy

Batteries are the obvious solution. They store and distribute energy to where it’s needed. Any technological revolution in batteries would completely change the world.

Fortunately, the same trends driving solar are creating stunning growth in battery technology.

Global storage capacity has skyrocketed as the cost has fallen. In the five years between 2008 and 2013, capacity for lithium-ion batteries increased more than eightfold. Which is why major tech firms have been pouring cash into the battery industry.

Tesla Motors – run by the world famous Elon Musk – has invested millions in developing battery tech. In fact, Tesla has built a 3,000 acre “gigafactory” – a project designed to massively increase the world capacity of lithium batteries. It opened for business at the start of 2017. This isn’t just some faraway “one day” project. This is happening now.

Musk also offered to use his battery technology to solve Australia’s power grid problems. In a media stunt of epic proportions he said that if it didn’t work within 100 days, he’d pay the cost.

Then you have Panasonic – another huge company investing in battery tech. It teamed up with Tesla on the gigafactory. It’s investing big in battery tech.

Upshot? It made a $913 million profit from its battery-related business last year.

There’s also General Motors… Apple… Sony… as well as countless smaller firms including one backed by Bill Gates. They’re all pouring cash into the industry.

It’s not hard to see why. Battery tech is vital to renewable energy.

The return of thorium

Did you know the world’s first nuclear power reactor ran on thorium instead of uranium? But Thorium has some terrible disadvantages. It can’t melt down, be used in weapons and the amount of radioactive waste is much smaller.

I know those don’t sound like shortcomings. They sound like enormous advantages. But the US Department of Defence disagreed back when thorium was first used. It wanted atomic bombs, not cheap, reliable and safe power.

Just like coal, you’ll find thorium in politically stable places like the US and Australia. At the moment it’s a dangerous by-product of mining operations there. But it could be the rediscovered innovation that makes nuclear power palatable. The reactor designs already exist. And there’s even a stockmarket-listed company advocating them.

There are so many opportunities in the energy sector, so many potential power revolutions, and so many places to make a fortune by investing in energy stocks. I’ve only listed some energy trends.

You can find out more about them, and precisely how to profit with which energy stocks, in the newsletter Frontier Tech Investor.

Andrew Lockley looks at how to invest in solar power – the one huge technology that will change everything.
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Farah Nayeri interviewed Mark Jacobson, a Stanford University professor, who has a plan to convert all 50 states in the US to renewable energy.
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As solar energy gets cheaper and more efficient, the number of new installations is growing exponentially. Here, Nick O’Connor looks at the solar revolution, and what it means for you.
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What if a new energy emerged as a genuine contender for the world’s number one fuel source, removing millions, even billions, of dollars of demand for oil?
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