Exxon’s Problem? Finding Oil. Our Problem? See Exxon’s Problem.
A Stock Poised to Boom Under Korea’s Green Plan
I recently paid my electric bill and was putting the inserts into the recycling bin when I saw one detailing where all my electricity comes from. I was surprised to see that my utility, National Grid, sources 74% of my electricity from what I’d term Green resources: 34% natural gas (considered transitionally Green because it burns cleaner than oil and coal), 27% nuclear, 6% trash-to-energy, 3% large hydroelectric, 3% biomass and 1% wind. Another 12% was imported power, almost certainly hydropower from Quebec (which, if true, would bring the Green energy total to 86%), while 9% was coal and 5% oil.
That surprised me, because the average American gets a lot less of their energy from Green sources. Of course, in the short term we have little choice in the matter unless we put solar on our roof or install geothermal. But most of us are locked in to what our utilities source.
If you include non-electric use of energy too—mainly our cars, trucks and planes—total energy usage in the U.S. looks like this, according to the Energy Information Agency (EIA): 37% is liquid fuels like gasoline, oil and other petroleum products, 23% is natural gas, 20% is coal, 8% is nuclear and 6% is renewable. That only adds up to 94%; the missing 6% can be found in rounding in the subsectors and the fact some fuels like gasoline and residential oil, were delivered in the year prior to when they were used. So count that missing 6% as fossil fuels. That means nearly two-thirds of our energy comes from fossil fuels, excluding natural gas.
That’s why it’s such a big deal President Obama is calling for 80% of U.S. energy to come from “clean” sources by 2035. If you missed it, in his State of the Union address, President Obama called our national lagging in utilizing Green energy “our generation’s Sputnik moment,” where we need to respond to catch up. He continued: “I challenge you to join me in setting a new goal: By 2035, 80% of America’s electricity will come from clean energy sources. Some folks want wind and solar. Others want nuclear, clean coal and natural gas. To meet this goal, we will need them all.”
That’s a pretty bold goal, especially considering the EIA sees the percentage of oil and coal rising to 66% of U.S. energy sources by 2035 based on current planning and trends. And if you drill down into our existing Green energy data, the president’s goal is even more audacious.
The vast majority of what the EIA terms renewable is from large hydroelectric projects, like the Niagara Falls power project my father worked on in the 1950s. There are two things to know about hydro power: It’s great and there isn’t any more of it coming—there are few good sites left and with additional fish, but wildlife concerns, no Western nation even has a hydro project on the drawing board.
As far as nuclear, consider that we have 104 nuclear reactors in the U.S. For the first time in 30 years new plants are being built. But only another four are expected to come online by 2018, so as a percentage of energy, nuclear will grow, but not enough to more than double America’s clean energy.
Even if political wrangling means we only aim for half of Obama’s 80% mark, with nuclear and hydro producing slow growth at best domestically, it means solar, wind, geothermal and every other clean energy technology you’ve heard of have to grow exponentially in coming years to help meet clean energy goals. That means more jobs of course, through domestic research and manufacturing as well as bolstering our exports to other nations.
It also means huge profits for investors.
Consider this: Last year Cabot Green Investor subscribers enjoyed the newsletter’s portfolio gains of 24%, the best of all the clean—and Green-stock newsletters and far better than alternative energy exchange-traded funds, green mutual funds and the broad market—and that was in a market backtracking from a recession, government funding cuts and flops in expected international climate agreements!
Think of what Green will provide as the economy steadies on its feet, the market improves and governments worldwide begin refocusing on their energy independence.
Let me give you a hint: It has already started and right now my subscribers are enjoying huge gains, including nearly 150% in Polypore (PPO), 50% in a company that makes solar wafer processing equipment and 50% in an organic food maker whose shares are being gobbled up by a hedge fund legend. Plus double-digit profits in a company key to the stunning growth globally in nuclear power, a cutting edge biofuels stock that surged 17% in one day last week, a firm that installs wind turbines and photovoltaic farms, and more.
The full portfolio is available only to Cabot Green Investor subscribers, but I do have one low-priced stock to recommend today that I expect to surge based on another country’s clean energy plans.
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Turn Market Volatility Into Huge Gains
Leverage your investments to make money in all markets! Cabot Options Trader Editor Rick Pendergraft uses the market’s volatility to bring his subscribers huge profit-making opportunities. Just check out these gains from the last three months:
A 70% gain on a Call on Linear Technology (LLTC) in only 11 days!
An 128% gain on a Call on Maxim Integrated Products (MXIM) in 15 days!
A 164% gain on a Put on Cisco (CSCO) in ONE day!
This small stock is a play on a key driver to the worldwide boom in Green energy I haven’t yet addressed. And it is perhaps the most important one to politicians: energy security. For one, it’s getting harder to find oil—it was reported this week the world’s largest oil company, ExxonMobil (XOM), has found only 95 barrels of oil to replace every 100 barrels it sold in the past decade. That’s a problem, since it means there’s less oil around.
Secondly, world demand for oil is booming, thanks to China, India, Indonesia and nearly every other nation. Demand is so great that the International Energy Agency strongly warns that by 2035 the world needs to find the equivalent of FOUR Saudi Arabias to simply sustain today’s demand levels! ExxonMobil’s problem with finding oil is ultimately our problem—and a reason to go Green.
There are a number of astonishingly large alternative energy programs recently put in place in areas like China and the European Union, but today I want to focus on a major, but often overlooked economy: South Korea. Korea is the world’s 15th largest economy with annual GDP of $1.5 trillion—the 11th largest user of energy. It is, obviously, a major trading partner with the U.S., as attested by the prevalence of Hyundais on the road and Fila sportswear at the gym (Italian origin, yes, but Korean owned).
Korea also imports a jaw-dropping 97% of its energy.
It’s lacking in natural energy resources, so the country has no choice but to go Green. Right now it gets just 1% of its energy from renewable resources, a reason the government has just enacted an aggressive national plan to get Greener.
Right now the mandate is to quintuple the amount of renewables in the country by 2015, to 5% of national energy usage, raising that sharply in subsequent years. One additional problem for Korea, though: The peninsula doesn’t have very good prospects for solar and wind. Korea’s solution: fuel cells.
A fuel cell is an electrochemical device that draws energy from an input through electron transfer via oxidation. That in itself is pretty amazing—after all, combustion is the dominant method of powering everything and the biggest reason global warming is such an imminent threat.
The byproduct of the fuel cell? Heat and not much else. If you use the heat emitted for an obvious purpose, like heating a building or its water, you end up with a manner of consuming fuels that can claim efficiency of over 70% and in some cases 80%. A typical fossil fuel power plant operates at about 35% conversion efficiency—and of course emits acid rain-type and greenhouse gas-type particles.
My stock recommendation is a Connecticut firm called FuelCell Energy (FCEL) that has been researching fuel cells for decades, and has been selling them the past decade.
Clients are institutions looking to reduce their carbon footprint, like Yale University, convert waste product into energy, such as Gills Onion, one of the nation’s largest onion processors which uses as much as 300,000 pounds of onion waste to run its fuel cells, to industrial users looking to maximize their efficiency, such as natural gas pipeline owner Enbridge, which uses fuel cells to use natural gas ordinarily released from pipelines to relieve pressure.
Korea has established fuel cells as the top tier candidate for renewable energy credits in its national Green plan. By 2030, the plan is to have the capital of Seoul generating 48% of its clean energy via fuel cells.
FuelCell Energy has the inside track on selling fuel cells to Korea. For one, the major Korean conglomerate Posco, one of the world’s largest steelmakers and a major power utility in Korean, owns over 10% of FCEL shares and is an existing customer. For two, no other company makes fuel cells as powerful as FuelCell Energy’s.
For the current year, look for FuelCell to post all-time high revenues around $111 million while narrowing its net loss to 40 cents. Shares are low-priced, a 2, and with the prospect of major Korean orders to be announced, a possible home run.
We’re following FCEL closely in Cabot Green Investor and will be featuring more low-priced, high-growth companies in the months ahead.
All the best,
For Cabot Wealth Advisory
Editor’s Note: Brendan Coffey is the editor of Cabot Green Investor, which ended 2010 with a 24% return, easily trumping its benchmark, the WilderHill Clean Energy Index, which fell 7%! And that’s merely the beginning. The high-potential socks Brendan recommends have even further to go in the weeks, months and years ahead. Don’t miss another recommendation. Get started today!