Solar Sizzles as Oil Fizzles — Investing in Renewable Energy Tech
Today’s essay begins with the news out of South Korea. One of their corporate stars — LG Chem — is riding high despite the pandemic, lockdowns, and general gloom.
How so? It’s in the right sector, that’s what! LG Chem produces batteries that go into electric cars, including Tesla.
The Financial Times reports that they have US$125 billion in orders. That’s enough to keep them busy for the next five years. They’ve also surged to become the world’s largest battery maker.
Apparently, they can thank tighter environmental regulations out of China and Europe — the two regions that account for over 70% of EV sales.
They might be able to add the US to the ‘high growth’ category, too. That’s if Joe Biden wins the election. Senor Biden has come out with a US$2 trillion ‘climate plan’.
It seems like every day there’s another story showing the march of renewable technology and its associated themes.
Here’s another one: over in South Australia the word is that electricity costs could fall 75% during the day as rooftop solar goes up everywhere.
That’s thanks to a small company looking to pinch market share from the big players. The chief exec is quoted as saying…
‘Substantial savings would be available for customers who were able to shift their usage into the middle of the day, or who could add a battery to soak up and save cheap power during the solar peak.’
Investing in Renewable Energy Tech
How long before every house has their own battery pack — or one sitting in the driveway? I can’t tell you right now, but that day is marching ever closer.
We can see clearly where the tailwinds are. And also, the headwinds. Woodside Petroleum just announced $6.2 billion in write-downs and charges as part of its latest results. The lower oil price was largely to blame.
Some might say that Woodside projections even now look generous. They still assume a $65 oil price in 2025.
That’s a little far away today to bother wondering if it will be right or not. It’s hard enough to see that in 2020.
One reason is that Libya has resumed exports after being shut out of the market for six months.
The civil war seems to have settled down there, but they’re coming back to the market at an inopportune time relative to the supply and demand dynamic.
That’s not all when it comes to oil. So many of the exporters — Iraq, Iran, Venezuela, Libya, Nigeria — rely to an extraordinary degree on energy exports for their government revenue. No oil sales almost equates to no money at all.
That could incentivise them to pump as much oil out as possible to get whatever cash they can. It would also help drive US energy firms into the ground.
We’ll see on that. It’s likely to be much more fun focusing on sectors with brighter outlooks.
Copper is worth thinking about. For years I have read that the renewable transition demands extraordinary amounts of copper. And for years little investment has been made in new supply.
For years the copper price has waxed and waned without ever entering the forecasted huge bull market.
Perhaps the time is now. The copper price has been rising even if economic demand is weak and the outlook bleak. We know big infrastructure plans are on the table too.
It’s not a bad idea to draw up a list of the relevant projects and start tacking how they get on with their respective projects. You don’t have to commit to anything today.
In the meantime, gold still glitters.
The price remains around $2,500 in Aussie dollars. That’s good cash flows for the producers and excellent prospective margins to incentivise exploration and deals.
Editor, The Daily Reckoning Australia
PS: Market expert Shae Russell predicts five knock-on effects of the recent market crash that could be even bigger threats to the average investor’s wealth than the crash itself. Learn more.