Tag Archives: Transition

Investing for Energy Transition: November Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: Please enjoy this month’s podcast for free, at SoundCloud: TerraJoule.us November podcast.

From this month’s issue:

No country better illustrates the three phases of energy transition than the United States, which was damaged initially by the energy shock, then struggled and stagnated for five years, and is now starting recover. An excellent way to measure this story has been to follow energy expenditures, which rose sharply on oil’s initial repricing, crashed during the crisis, rose again during the early part of the recovery, and are now falling.  | see: US Annual Energy Expenditures as a Percent of GDP 2004-2014. The United States has been busily constructing new wind and solar capacity, and taking advantage of its very cheap and plentiful supply of natural gas. All the while, Americans have been dumping their demand for oil—which remains expensive despite the recent seasonal decline from $100 to $80. Accordingly, energy expenditures as a percent of GDP are in a four year downtrend, and at 8% are back to levels last seen in 2005. A reminder: upfront costs for the deployment of wind and solar can be high, but the ROI starts immediately and actually increases as time moves forward. The US is now vying with China to be the biggest world mover in the buildout of wind+solar. This pathway will pay increasing dividends as time progresses. We should expect the downtrend in energy expenditures to continue, with gains distributed to the US economy in the form of wealth and GDP.

US Annual Energy Expenditures as a Percent of GDP 2004-2014

Also in this month’s issue:

The model portfolio as of 31 October 2014 is down – 4.26% since the inception date,  April 1, 2013. The portfolio remains fully invested. There are no changes this month to the portfolio’s composition. 

“TerraJoule.us eBook – Investing for Energy Transition – November 2014” by Gregor Macdonald – Editor on Ganxy

The Energy Transition Portfolio: April Issue of TerraJoule.us

Slide1Each issue of TerraJoule.us contains: a Main Essay, a Model Portfolio, a Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

This month’s issue concentrates on the model portfolio, published and updated once a month in every issue, and which has just completed its first year. This is an all ETF portfolio, and employs an allocation strategy, concentrating in the energy sector. While it’s satisfying to see the portfolio up +11%, in this month’s issue we take a look at the next ten years, and how the portfolio might change were it to run to the year 2025. In other words, what if the model portfolio were to become a longer running, Energy Transition Portfolio? (We also look at two companies within selected ETFs, Quanta Services and Solar City).

One of the biggest surprises of the past five years has been the ability of renewables—especially solar—to successfully exploit the domain of sluggish, meandering global growth. To understand how this can be is to understand the unique conditions particular to our current energy transition: we live in a time of low interest rates, and, high overall prices for energy from all sources. These twin realities have come together and they’ve produced counterintuitive results. Global demand for energy is growing again, but, almost entirely through the powergrid. Moreover, the bulk of economic activity we detect in global GDP is also transitional, in nature. At TerraJoule.us, we advocate a thesis of energy transition as a rather unique phase in capitalist history. With cherished beliefs upended, the question remains: how can investors locate discrete pockets of high growth during this time, and for the next decade? This month, we consider the likelihood that the TerraJoule.us model portfolio combines the correct themes and timelines, as energy transition enters its second decade, and its likely resolution by the year 2025.

The TerraJoule.us Model Portfolio, which began April 1, 2013, is also anticipating the coming shoulder season in the energy complex. Accordingly, we will make significant changes to the model portfolio this month.

Following the concept of the portfolio’s two, separate timelines, we have now completed our work in the first year to construct the portfolio’s rough outline. Now comes the more typical Springtime seasonality when oil and natural gas prices tend to weaken. Readers are aware of course that natural gas prices have already weakened greatly. That’s not a surprise. TerraJoule.us over the Winter was, and has remained, adamant that those short-lived price spikes were 1. not sustainable, and 2. not the sign of the next repricing cycle. 

That said, notice that the TerraJoule.us model portfolio is now adding the FCG: First Trust ISERevere Natural Gas Index ETF to the list of investible ETFs. We will not take a position in that ETF just yet, and will likely wait until either 1. a major correction in stocks gets underway or 2. we are closer to 2015. But given the view that natural gas, through the globalized LNG market unfolding later this decade, is due to become a major input to global powergrid growth, it’s inevitable the portfolio will need a direct position in natural gas.

“TerraJoule.us eBook – The Energy Transition Portfolio – April 2014” by Gregor Macdonald – Editor on Ganxy

When Cities Drive Energy Transition: February Issue of TerraJoule.us

Front Title Page IMAGEEach issue of TerraJoule.us contains: a Main Essay, a Model Portfolio, a Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

The theme of this month’s publication, When Cities Drive Energy Transition, is that we’ve reached the point in energy transition when cities are about to take over, as the world economy shifts its weight from liquid fossil fuels to electrical power. This is not the end of oil as a key input to many industrial processes by any means. Indeed, you are encouraged to read the September 2013 issue, Road Map to the Next Repricing of Oil, to understand better why oil will reprice higher. That said, we are indeed passing beyond the oil age, which turns out to have been a brief, 70 year period when oil was the primary energy source for the world:

There were a number of promised changes to developed world oil demand, touted just five years ago, that frankly seemed wishful and unimportant at the time. They included increased MPG in existing cars and trucks, the onset of electric vehicles, the transition to NG powered engines, the resurrection of public transport, growth in renewables, and migration of workers back to the urban core. These factors have banded together now, however, and collectively have shown up five years later as a serious, serious impediment to oil demand growth, especially in the United States. No, sales of Teslas alone have not shifted the trajectory of US oil demand growth. But as the marquis EV, Tesla is a proxy for the amazing set of new conditions now blunting the US economy’s return to oil-based consumerism. As the economy stabilizes, the US populace finds it can take a train on a restored commuter line in Boston; Bus Rapid Transit in Los Angeles; a streetcar in Charlotte; or new bikeways in Indianapolis. Meanwhile, a surge of solar power capacity along with already cheap electricity rates is restoring economic competitiveness to many American cities, as the US economy tilts from consumer-importer to producer exporter. Is it any wonder that California gasoline sales, therefore, have never recovered from the crash?

There are also changes to the TerraJoule.us Model Portfolio, which began April 1, 2013:

Renewable exposure now moves to 15% of the portfolio, as fossil fuel exposure remains stable at 45% and powergrid exposure at 25%. We make further investment in renewable exposure this month.

To purchase a single issue through Ganxy.com, please follow the link below:

“TerraJoule.us eBook – When Cities Drive Energy Transition – February 2014” by Gregor Macdonald – Editor on Ganxy

Invasive Solar: December Issue of TerraJoule.us

TerraJoule Cover IMAGE - DecemberEach issue of TerraJoule.us contains: a Main Essay, a Model Portfolio, a Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook – Annual Subscription.

Listen now to this month’s podcast for free, at SoundCloud: TerraJoule.us Podcast: December 2013.

The theme of this month’s publication, Invasive Solar, is that during the economy’s slow growth phase, when demand for fossil fuels remains well below trend, renewables and in particular solar are solutions that have come in to exploit a number of legacy shortcomings in the global energy system. In particular, along with natural gas, renewables and solar are becoming disruptive. How so? Well, in the case of solar, it’s growth rate is soaring at a time of broad economic stagnation in the OECD. Even at a time when demand for electricity is flat, to falling. That is quite unusual:

The TerraJoule.us database of solar growth indicates that global capacity this year will have moved from 100 GW to 142 GW. Next year, with China, Japan, and the US leading the way, the world will move to at least 175 GW of capacity. However, we think that the world could add as much as 52 GW of solar next year, with surprising contributions coming from the aggregated growth of smaller markets such as Malaysia, South Korea, and India. By the end of 2014 therefore, the world could see 190 GW of capacity. As a result of conversations this year with solar research analysts based in San Francisco, Boston, and London, we should see several years between 2015 and 2020 when the big three leaders of China, Japan, and the US, will be supported by new growth in many of these smaller markets. Finally, there will also be a return to higher growth rates in Europe.

The December issue also discusses the performance of the Model Portfolio, which is up +4.42% to date. There are also changes to the model portfolio, effective at the close of trading Monday December 2, 2013.

As of November 30, 2013 the TerraJoule.us Model Portfolio is little changed from last month, and is up +4.42% since inception. By comparison, in the same time period, the SP500 is up +15.6% and the ETF which follows Oil and Gas supermajors, IXC, is up 8.32%. As a reminder, the TerraJoule.us model portfolio is a lower-risk vehicle, which has its eye on playing the great transition from liquid fossil fuels to the powergrid. This is both a disruptive and a growth constrained landscape, in which the model portfolio intends to thrive—but importantly—must survive to take part in the global growth phase coming in the second half of this decade.

To purchase a single issue through Ganxy.com, please follow the link below:

“TerraJoule.us December 2013” by Gregor Macdonald – Editor on Ganxy