Email of the day
Comment of the Day

April 09 2014

Commentary by David Fuller

Email of the day

On solar power:

“You probably saw this already, being (like me) a fan of the tremendous progress and potential in solar power. A new cheap energy source is one of the key requirements to drive the expanding Third Industrial Revolution - and it is right on track to power the next secular bull market.”

David Fuller's view

Here is the report by Ambrose Evans-Pritchard of The Telegraph.

Many thanks for this informed email and an exceptionally good article.  Actually, while Eoin and I read as much as we can, we see only a fraction of what is potentially informative for the Collective.  Therefore we really appreciate these contributions from subscribers, contributed in the spirit or Empowerment Through Knowledge.

“The technology is improving so fast - helped by the US military - that it has achieved a virtous circle. Michael Parker and Flora Chang, at Sanford Bernstein, say we entering a new order of “global energy deflation” that must ineluctably erode the viability of oil, gas and the fossil fuel nexus over time. In the 1980s solar development was stopped in its tracks by the slump in oil prices. By now it has surely crossed the threshold irreversibly.  “The ratchet effect of energy deflation may be imperceptible at first since solar makes up just 0.17pc of the world’s $5 trillion energy market, or 3pc of its electricity. The trend does not preclude cyclical oil booms along the way. Nor does it obviate the need for shale fracking as a stop-gap, for national security reasons or in Britain’s case to curb a shocking current account deficit of 5.4pc of GDP.

“But the technology momentum goes only one way. “Eventually solar will become so large that there will be consequences everywhere,” they said. This

remarkable overthrow of everything we take for granted in world energy politics may occur within “the better part of a decade”.

“If the hypothesis is broadly correct, solar will slowly squeeze the revenues

of petro-rentier regimes in Russia, Venezuela and Saudi Arabia, among others.

“Many already need oil prices near $100 a barrel to cover their welfare budgets and military spending. They will have to find a new business model, or fade into decline.“The Saudis are themselves betting on solar, investing more than $100bn in 41 gigawatts (GW) of capacity, enough to cover 30pc of their power needs by 2030 rather than burning fossil fuel needed for exports. Most of the Gulf states have comparable plans. That will mean more crude - ceteris paribus - washing into a deflating global energy market.  “Clean Energy Trends says new solar installations overtook wind turbines worldwide last year with an extra 36.5GW. China alone accounted for a third.  Wind is still ahead with 2.5 times old capacity but the “solar sorpasso” will be reached in 2021 as photovoltaic (PV) costs keep falling.”

I encourage subscribers to read the full article above because it details many of the improvements that are occurring in solar power technology.  This is not fanciful science fiction.  Instead, it is an important part of the accelerating rate of technological innovation, which this service has enthusiastically spoken of for several years.

Lower energy costs in real terms are a key factor in the Third Industrial Revolution and essential to fuel the next secular bull market for equities, as the email above points out.

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