By 2050, world population will reach 9 billion. In order to meet mid-21st century world energy demands, supply has to grow by 80%.
That means in a mere 36 years, our energy supplies will have to nearly double. Most experts agree that simply isn’t possible.
So what is the fastest growing energy supply? It’s not oil, natural gas, solar or wind. I’ll get to exactly what it is below and how it is creating endless profit opportunities for investors.
But first, let me continue to scare you with regards to our energy supply problem.
Back in 2012, Royal Dutch Shell plc (NYSE:RDS.A) studied the situation. Its scientists wanted to understand how big the energy gap could end up being.
Shell’s study assumed technological, competitive and geological advances could boost supply by 50%. It also assumed high prices, “smart urban development” and other factors could reduce demand by 20%.
The study assumed advances in technology, competition and geology will boost energy supplies by 50%. It assumed demand reduction of 20%. This would come from a number of factors including higher prices and smarter urban development.
Even with all of this taken into account, Shell’s study indicated an energy “Zone of Uncertainty” would still exist between supply and demand. The scary part is that uncertainty could be equal in size to the entire worldwide energy output in 2000.
Even if a brand new energy technology was dumped in our laps today, it wouldn’t make much of a difference. According to the Shell researchers, “require thirty years of sustained double-digit growth to build industrial capacity and grow sufficiently to feature at even 1-2% of the energy system.”
While this sounds like the recipe for a worldwide energy war, there is a solution. Actually, it’s hundreds of solutions.
The World’s Fastest Growing Energy Sector
All those hundreds of solutions I talked about above are part of the fastest growing energy sector: energy efficiency. Energy efficiency has been underway for some time, but it’s really starting to gain traction.
How big can the energy efficiency sector get? The opportunities for growth in energy efficiency are nearly endless. We waste 57% of the energy we start with when we actually use it, according to the Energy Information Administration (EIA).
When it comes to electric power generation, it’s even worse, according to the EIA. Taken together, 70% of the energy we start with in coal, nuclear and natural gas-fired power plants is wasted.
How can we waste so much energy? Actually, it’s quite easy. Drive by any large-scale coal, nuclear or natural gas generating plant and chances are you’ll see a huge billowing cloud of water vapor.
This is wasted energy in the form of heat. Some of the newest plants recapture some of the waste heat to drive secondary generators, but much of the energy is still wasted.
Add to that, inefficiencies in voltage conversion, resistance in wires and inefficiencies in appliances and light bulbs. There’s plenty of room for improvement just about everywhere in any process that generates, transports or uses energy.
Refrigerators and freezers made before 1995 are prime candidates for replacement. It’s difficult to imagine unplugging and replacing a unit that’s in perfect working order.
But if you choose to do so, the new one will pay for itself in just six years time. After that, you’re banking real saved dollars from energy efficiency.
The Lowest-Hanging Fruit
It’s a safe bet that most houses in the U.S. still have plenty of incandescent light bulbs in use. Lighting constitutes 22% of our energy use.
Much of the energy from incandescent and other forms of lighting is wasted energy. All you have to do to prove it is put your finger on an incandescent light bulb.
It’s too hot to touch. All that heat is wasted energy. After all, the primary job of a light bulb isn’t to heat your house, it’s to provide light.
Incandescent bulbs are so inefficient that only 5-10% of the energy consumed is turned into visible light. The U.S. lighting market is a $100 billion a year industry.
Now it’s also the most visible (pun intended) area of energy efficiency. It all started in December 2007 when congress passed the Energy Independence and Security Act.
The act itself set higher efficiency standards for most consumer light bulbs. These new standards phased in between 2012 and this year.
Those new standards spelled the end of the incandescent bulb. At first, the lighting industry introduced the compact fluorescent lamp (CFL).
While more efficient, CFLs have their own set of problems. They’re supposed to last up to 10,000 hours, far longer than incandescents. Few do.
The second, and far more serious, problem is what to do with them when they burn out. Each CFL contains a small amount of mercury. Mercury is an extremely toxic element.
If a bulb breaks at home, vacuuming up the glass and mercury will distribute mercury vapor throughout the house. It’s not a good situation.
Most stores that sell CFLs have a disposal bin for used bulbs. However, many people who purchase CFLs simply throw them in the trash.
This creates an environmental problem. These days, CFLs are themselves becoming passé.
Technology Marches On
Thomas Edison once said, “There’s a better way to do it. Find it.” Engineers at Cree, Inc. (NASDAQ:CREE) have taken high-intensity light-emitting diodes (LEDs) and migrated them from flashlights to light bulbs.
When LED bulbs were first introduced about five years ago, a 60-watt-equivalent bulb cost $40. With the introduction of high-volume manufacturing, 60-watt-equivalent LED bulbs cost less than $5.
Instead of drawing 60 watts of power, an LED version draws 9 watts, or about 15% of an incandescent version. Cree’s bulbs come with a 10-year warranty, are dimmable and have an estimated 25,000-hour lifetime.
Depending on how many hours a day it’s on, an LED bulb can pay for itself in as little as a few months. There are plenty of LED bulb savings calculators online.
A great strategy for switching to LED bulbs is to replace incandescents as they burn out. Cree bulbs are currently available at The Home Depot, Inc. (NYSE:HD).
A great strategy for investing in energy efficiency is to add a few shares of Cree, Inc. to your energy portfolio. The company recently announced a continuation of its share repurchase program.
Between now and the end of 2015, Cree plans to repurchase $200 million more of its shares. Cree shares are currently trading near their 52-week low.
The company continually adds new products to both its consumer and industrial product lines. As energy efficiency continues to gain traction, Cree is in an excellent position to benefit. So are its stockholders.
In my Wealth from Power newsletter, we’re capitalizing on all the energy sectors, and especially our newfound energy surplus here in the U.S.
How are we doing? We’re five for five. That’s right, we have five stocks in our Wealth from Power portfolio and they’re all profitable. Three of them have double-digit gains.
Several of our open options positions have gains over 200%. We just added a sixth stock to our portfolio this week. To find out how you can get in on the profits, check your subscriber email for an exclusive invitation.
Profitably Yours,
Peter Fallon
