Cheap Energy Works its Magic, the October issue of TerraJoule.us, suggests that after a dismal year for global growth, Non-OECD economies are finally ready to pick up speed and that cheap energy, from all sources, stands ready to fund better global growth:
Largely due to aging populations, future growth in developed markets (DM) will be mostly constrained well into the future. Japan of course is the central factor in this constraint, and Europe is close behind. The main uncertainty in the future of any DM growth outlook centers exclusively, therefore, on the US. If the US undertakes a long overdue infrastructure buildout program, and innovation spreads to second tier US cities, then the US economy could effectively counter the structural weakness in Japan and the EU, and lift DM growth higher overall.
However, we don’t need to fret quite so much about the near term-direction of DM growth, because EM growth is already picking up. The IMF now expects EM growth in 2016 to average 4.2%, up from 4.1% in their prior forecast. The IMF also sees EM growth rising to 4.6% in 2017. Despite a concurrent downgrade of DM growth, the higher EM growth forecast bodes well for global growth. In fact, it bodes very well. The next unit of energy consumption, infrastructure expansion, and technology deployment is far likelier to take place in EM, regardless. Moreover, the 5 billion people in the developing economies contain tremendous, pent-up development potential. It is why, as one example, TerraJoule.us has paid particular attention to India as that country undertakes a revolutionary effort to bring 350 million citizens into the electricity system.
In the continuously updating TerraJoule.us Global Grid Decarb Monitor, the forecast for power generation growth from wind and solar is revised upward this month. We now expect that in 2017, a full 35% of the marginal growth in global power generation will come exclusively from these two sources..
Finally, The TerraJoule.us Transition Index, composed of 70% ETFs and 30% individual equities, rose to 103.51 to finish the month of August, having started the new year at a notional value of 100.
–Gregor Macdonald, Editor of TerraJoule.us – A Journal of Energy Transition.