Editor's Note: Yesterday we shared Kent's bullish 2016 oil price forecast with you. We're going to make plenty of money on Kent's upcoming oil plays, but as you're about to see, next year's alternative energy profits could be even bigger. Here's Kent…
During most oil bear markets, alternative energy sources like solar usually stagnate. The reason for this is simple: markets tend to use more of a cheaper product. After all, when gas prices are low, that family trip across the country is that much easier to plan.
But this time really is different. We haven't experienced that customary stagnation in this market. In fact, the opposite is true, and alternatives have begun a long, steady rise.
This is no fleeting market blip, though.
Alternative energy, led by solar, is here to stay. We've reached a tipping point all over the world.
There's now a confluence of technology and economy that assures these new energy sources will continue to be adopted and improved upon – at ever-increasing rates.
As I've said, crude oil will continue to play a big role in the balance of the energy markets, but this year we'll see alternatives take an outsize position in the sector.
The profits will be just as big, too…
This Is Not Just an American Phenomenon
Part of the reason for alternative energy's "day in the sun" has to do with where energy demand is coming from and how it's being fulfilled.
The West is a significant source of energy demand, but it's no longer the main driver and focus of that demand. Rather, it's being driven by countries further down the income scale, where even $40 or $50 oil is still just too expensive, especially when you factor in the premium most of the rest of the world pays for its oil supply.
Nigeria, for instance, is Africa's largest oil exporter. But it has such a terrible refinery sector that 85% of its energy needs have to be met from expensive imports.
This is driving a wave of innovation in the developing world. Last year, China led the charge into clean energy funding, and it will build on its $83 billion investment there in 2016. Brazil and India are close behind, while Kenya boasts one of the largest solar rooftop systems in Africa – and will soon host the continent's largest wind farm.
This increase in adoption is partly due to grid parity, the ability to deliver electricity at the same cost as traditional sources. This year, Deutsche Bank predicted that solar systems will be at grid parity in up to 80% of the market by mid-2017. And that's one of the forces that's going to drive our profits in 2016.
Solar power is currently booming all over the world. In the United States, a solar project is completed every two minutes – and in China, the pace is even faster.
Over the past 15 years, global solar capacity has grown 100-fold to the point where it is now the equivalent of around 178 nuclear power plants.
In addition, the average price of a solar panel has declined by more than 60% since 2011, and technological advances are pushing prices down to the point where U.S. solar capacity alone is expected to double next year from its 2014 levels.
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.