The Growth Market That Could Last the Century
Father’s Day was yesterday. I spent most of mine next to the fire. It might be 30 degrees in Townsville, but down here in Victoria, it’s still cold.
At one point, we were on the rug next to the fireplace playing a board game with our little girl. She’s three. It didn’t matter how each round ended. She’d jump up and shout, ‘I won!’
Half the time I wasn’t paying attention. I was staring at the fire. I love staring at the fire. Apparently, we men have never really left behind the days on the Savannah.
After a day’s hunting, that’s what the men did – sit around the fire and look at it. Suits me.
It did get me thinking about wood, though.
Ours happens to be an open fireplace. It’s appallingly inefficient. Most of the heat goes up the chimney. But nothing beats getting a big, roaring crackle going.
Late yesterday, we even toasted a few marshmallows.
Why the opportunities around renewable energy could run for a century
Wood was of great concern back in the days of Elizabethan England. It was the prime energy source. The buildings were wooden. The Navy needed large oak trees for ships’ masts. The trees took 80-120 years to grow.
In fact, it took 2,500 trees to complete an English warship. They couldn’t be the same tree, either. A ship is an irregular shape, and different wood bends better than others.
Then there were the ships of British commerce. More trees required. Heat and cooking added to the demand. Then there were the fences, forges, barrels and docks. They all needed wood.
The fields around London were felled further and further out to supply the city. One of the best things about the discovery of America was the vast forests the English could get their hands on. But by then, coal was on the ascendancy to its eventual moniker – King Coal.
Why am I telling you this?
I just finished a book called Energy: A Human History. A man called Richard Rhodes wrote it. A previous book of his won a Pulitzer Prize.
Energy is full of anecdotes on the problems each power source brings and the people who played a role in solving those problems or advancing us to a new era of energy supremacy.
Wood made way for coal, which made way for oil.
In turn, these shifts led to unexpected technological and product development.
As the easy access coal ran out, for example, British miners developed rudimentary ways of going deeper underground. That basic trend is still running today. But no jetliner ever ran on a steam engine. That took crude oil.
And there are historical repeats as well. The cancerous pollution in China now is exactly what English society went through during the same industrialisation process.
The main point is that these energy shifts run for a very long time. Some of the research Richard Rhodes cites reveals that all Industrial Age energy sources follow a similar trend when they enter the market.
It takes 40 to 50 years for an energy source to go from 1% to 10% of market share. An energy source that occupies half the market takes a century to get there.
Italian physicist Cesare Marchetti came up with a basic insight as to why adoption takes so long. Society needs to learn, and can only do so as ideas spread.
New technology is the beginning.
Then the infrastructure needs to follow.
Old ways need to get left behind.
Taking new ideas for granted
I got a small example of this on the weekend. My parents were telling us about their recent trip to Sydney. They used Airbnb for the first time.
Apparently, the place was tiny and they were sharing a bathroom with the hosts. They didn’t like that.
‘Why did you book a place with the hosts still living there?’ I asked.
They looked at me strangely.
‘Isn’t that what happens all the time with Airbnb?’
The dear old things didn’t realise Airbnb has empty flats, houses, townhouses and probably beach boxes all over NSW – no sharing required. They didn’t know.
The world’s primary energy source now – crude oil – will not stay this way. The slow dismantling of fossil fuels is happening right in front of us.
Vicinity Centres Ltd [ASX:VCX] is a $10 billion real estate behemoth. It owns shopping malls all over the country. It’s now going to spend $75 million installing solar infrastructure for its centres. It could potentially cut its grid consumption by 40%. We’ll keep hearing more of these stories.
What Energy: A Human History clearly shows is that opportunities around renewable energy will keep presenting themselves for years to come.
It’s been the same story for 400 years.
For example, Colonel Drake hit oil in Titusville, Pennsylvania in 1859. That was 159 years ago. Trillions have been made in oil since.
The key is to watch for the new developments that keep things pushing forward in a major way.
One such development will be revealed tomorrow.
It’s an incredible story, with lasting implications that could revolutionise the world as we know it.