Thursday, July 31, 2014

Energy: Wind/Solar Outpacing Hydro...This Is "Hot Air" To Pay Attention To!!

Before getting to the "hot air"....
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 And now, the 'hot air'.....

Fyi….One of our global macro themes in the energy space focuses on the growth in the generation of and use of renewable energy sources.  The tweet below from the US Energy Information Administration (EIA) shows some very interesting dynamics within the renewable basket, with sources from wind and solar (ergo: the pun, “hot air”) starting to outpace hydro (for a long time, the primary renewable in the US).  I’d recommend a read of the EIA article linked in the tweet.  Here are some clips:

April marked the eighth consecutive month that total monthly nonhydro renewable generation exceeded hydropower generation. Only a decade ago, hydropower—the historically dominant source of renewable generation—accounted for three times as much generation in the United States as nonhydro renewable sources

EIA projects that 2014 will be the first year in which annual nonhydro renewable generation surpasses annual hydropower generation

Hydropower capacity has increased by slightly more than 1% over the past decade, although actual hydropower generation can vary noticeably by season depending on water supply conditions. Wind capacity, on the other hand, has increased nearly tenfold over that same period. Although wind often has lower capacity factors than hydropower, wind generation increased from 3% to more than 30% of total renewable generation between 2003 and 2013.

We’re constantly in the hunt for optimal ways to invest in this theme.  Currently, one of our positions is TAN, an etf which is a basket of solar related stocks.  (And while it wouldn’t be the primary reason for investing in Google (GOOGL), it’s noteworthy that Google has made major investments in the alternative energy space including wind farms!)

I included a chart that shows TAN vs Oil (the West Texas Intermediate Oil index).  There is a great deal more to what drives TAN than just the price of a barrel of WTI, but it’s noteworthy that since the ISIS/Iraq and Israel/Hamas troubles in the Middle East have flared up, the correlation of the two has been more positive.  As oil has been coming off those crisis-shock highs, TAN is following along.  At some point, however, I believe that TAN will hold its own based on the longer-term theme cited in the EIA article, and I’ll be looking to add to the position.

Will keep you posted as our positions in this space grow.

 Please continue to visit Soos Global Market Musings for updates.

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(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
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Additional Disclaimer: currently long many stocks/ETFs including TAN.  Positions may change at any time without notice.     

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