The reason for clean energy’s renaissance is simple: When oil and gas come at a high cost, there’s more of an economic reason to find alternative energy sources. Furthermore, clean energy and propulsion has attracted a lot of interest at the federal level. In 2021, Transportation Secretary Pete Buttigieg touted electric vehicles as a hedge for high gas prices. One year later, Congress passed a bill which would secure a $7,500 electric vehicle tax credit for sedans under $55,000 and SUVs under $80,000.
Is it time to start seriously considering clean energy opportunities? Similar to future technology in space, now is the time to think about if — and how — clean energy may fit into your portfolio.
Since the industrial revolution, fossil fuels have propelled both technology and productivity. Electricity was generated using coal, while supply chains were moved forward by oil and refined fuels. But over the past 180 years, the world has changed significantly — and what were once cheap and reliable fuel sources are no longer as easy to acquire.
The latest issues in the fuel chain started during the COVID-19 pandemic. With “Safer at Home” orders taking grip across the country, energy was affected in multiple ways. Between a lack of workers, political headwinds grounding new oil exploration in the United States, and reduced demand for oil and gas, prices dropped and production decreased for nearly a year.
Once a vaccine was readily available and the world turned back to normal, the stage was set for a shortage. The invasion of Ukraine only made things worse, as nations embargoed oil and natural gas from Russia, blocking deliveries to most of the western world.
Complicating things even further are the energy supply chain issues around the world. Although long-haul pipelines from source to refineries and terminals exist, much of the delivery infrastructure still relies on cargo ships, railroads, and over-the-road delivery. With capacity constraints affecting all cargo shipments, the scales of supply and demand remain out of balance.
Even though energy markets are facing restrictions on multiple levels, the demand remains. This is when it’s time to reconsider the future of energy, and how clean energy sources can not only satisfy demand, but also bolster your portfolio as well.
The high cost of oil and natural gas is exposing one of many truths of economics: High fuel prices push investors into new energy sources. Thanks to new developments in technology, the price of generating power using wind, solar, hydroelectricity, and battery storage is going down.
Moreover, clean energy is continuing to move forward. For example: More auto manufacturers are getting into electric cars, powered by batteries that can drive 300 miles on a single charge. With continued research, we are looking at a future with higher capacity with less weight — which may drive prices down, and improve adoption.
Other new innovations are on the horizon which will reduce pollution and make clean energy more efficient. The first commercially relevant fusion reactor is only years away, with one company raising over $2 billion to design magnets necessary for the process. Another group is working on technology to recapture carbon emissions from massive cargo ships, which will impact the globe in a major way.
Understanding how energy innovation will affect both your portfolio and lifestyle is multi-faceted. Part of it is optimism: Thinking about the energy challenges the world faces, and drawing up scalable solutions. Part of this is education: While progress is a slow process, the fact is inventors are taking action today to solve them, which creates investment opportunities for early adopters. And part of it is research: While many of the change agents are currently privately held, the successful ones will eventually go public – meaning you will be able to own shares in them.
It’s easy to say the clean energy world is too complex and will collapse. But it’s smarter to say that the system is so complex that it’s easily adaptable, and opportunity is just an innovation away. By understanding the space now, investors can get ahead of the innovation curve and find the right opportunities for your risk tolerance.
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