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Since President Obama climate change speech at Georgetown University last week, Republicans and critics have accused Obama of engaging in a "War on Coal."
This isn't the first time that the President's statements on coal-fired power plants have raised questions about his energy policies. He even campaigned on higher electricity costs in 2008 when he suggested that costs would "necessarily sky rocket" to prevent the construction of new coal plants.
Obama has repeatedly argued for more spending on green investments in energy, despite multiple scandals involving campaign bundlers and billions of taxpayer dollars wasted on Department of Energy loans to companies like Fisker Automotive, Solyndra, and Beacon Power.
Now, as the President seems eager to double down on the "green" policies of 2009, which couldn't come close to creating the promised five million green jobs, the President wants to spend more of your money and execute new environmental and alternative energy laws and regulations by fiat.
But despite the stark reality that green technologies still haven't caught up with the free market solutions when it comes to bang for your buck, there's good news for investors looking to cash in on the President's War on Coal.
Just follow the money on the biggest trend in energy policy today.
It's All About Energy Efficiency
With the President suggesting new laws and regulatory actions, one should expect increases in new mandates on the biggest trend in energy policy today.
That trend is the reduction of energy consumption in commercial buildings and households around the country. Over the past decade, this has been one of the biggest sources of reduction in energy usage across the country.
According to the Energy Information Administration, the U.S. annually loses quadrillions of British Thermal Units of energy through inefficient infrastructure and consumption practices.
In order to address the rising loss of energy, and to reduce overall consumption, state governments around the country have increased regulatory measures that are committed to energy efficiency standards released under the Green Communities Act of 2008.
Each year, the American Council for an Energy-Efficient Economy releases its annual report on which states have reduced their energy consumption by adopting new standards for commercial and residential buildings and reductions in energy usage.
Naturally, states that tend to be bluer leaning lead the charge, given their tolerance (or submission) to government intervention in the marketplace. Massachusetts topped the list for the sixth year in a row in 2012, followed by California, Maryland, New York, and Vermont. But the most improved states in the country are actually very conservative states like Oklahoma, Montana, and South Carolina.
This trend toward more compliance is expected to continue.
Congress is now looking to take even more action on reducing energy consumption again before the President can act on his promises to use regulatory efforts to reduce carbon emissions.
Congress will soon debate a new law introduced recently by Senators Jeanne Shaheen (D-NH) and Rob Portman (R-OH), known as the Energy Savings and Industrial Competitiveness Act. The law is expected to target new and existing construction of commercial buildings and residential households.
Both combine for 50% of the nation's primary energy use, and 70% of the electricity. According to McKinsey Global Institute, the U.S. could reduce energy use in new and existing buildings by more than 9.1 quadrillion BTUs or 23% of expected demand by 2020 and it would pay for itself within 10 years. However, getting the money upfront will be the greater challenge.
Owens Corning (NYSE:OC), along with 200 advocacy groups and businesses, have applauded the bill. A representative from Owens Corning said, "Energy efficient buildings must be a cornerstone of National Energy Policy as the building sector remains the nation's single largest energy consumer. As the residential insulation market leader for over seven decades, we are keenly aware of the energy savings, environmental improvements, and job creation opportunities derived from strongenergy efficient buildingspolicies and practices."
But the opportunity for investors is already presenting itself in the efficiency sector.
The Profit Opportunity for Energy Savers
Despite my outright contempt for nanny state solutions to save us from ourselves, the reality is that -either by fiat or free market – the long-term energy strategy of the United States will trend toward more energy efficiency.
As I noted last week, the free market is well ahead of the Obama Administration on reducing carbon emissions through the radical innovation of hydraulic fracking. But some companies really heat up when talk of agency fiat or Congressional action begin to dominate the policy discussions in Washington.
Here are just a few names to consider:
- Large conglomerates like Honeywell International, Inc.(NYSE:HON) and United Technologies Corporation(NYSE:UTX) provide turnkey solutions in energy efficiency in addition to their core business offerings. Both provide a little bit more security through their diversification should new standards or the markets not move to toward increased efficiency in a quick manner. Both stocks are near 52-week highs as of this morning.
- Ameresco (NYSE:AMRC) provides energy efficiency solutions for commercial projects across North America. The stock has a high P/E ratio, but is still an attractive stock for this sector when valued under $10. The company also upgrades energy infrastructure with turnkey renewables, a long-term market trend explored in the past by our Dr. Kent Moors.
- Cree, Inc. (NASD:CREE) develops lighting-class light emitting diode (LED) products, which are essential in virtually all renewable projects to reduce emissions and power usages in commercial and residential projects. The stock regularly soars when chatter of government intervention in the energy markets heats up.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.