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. During the 2014-2016 oil bear market, when crude prices dropped from more than $100 per barrel to less than half that, the alternative energy market didn't see any of this customary stagnation. In fact, the opposite is true, and alternatives have begun a long, steady rise.
Alternative energy (even without counting hydropower) now receives more than twice as much investment as fossil fuels like oil and coal. And this is no fleeting market blip.
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 in 2017, we'll see alternatives take an outsize position in the sector.
The profits will be just as big, too...
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.
Worldwide, the amount of electricity produced by solar has doubled seven times - just in the last 16 years. Wind has doubled four times in the same time period. Meanwhile, the oil and coal industries have been shrinking, as prices and investment have both declined.
This increase in adoption is partly due to grid parity, the ability to deliver electricity at the same cost as traditional sources. In January 2015, 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.
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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 in 2016 from its 2014 levels.
This growth has brought solar to "where it needs to be" in terms of price to ensure accelerating adoption.
The U.S. Department of Defense is moving into solar, as it plans to convert more than 40 military bases to be energy self-sufficient, so that they can continue to operate in case of an attack on the power grid.
Solar power is the main electricity source for this project, and so far several bases have had solar power plants constructed, including a 500-megawatt facility at the Fort Irwin Army base in the Mojave Desert, the Pentagon's largest, and a 14-megawatt facility at Nellis Air Force Base in Nevada. The Department of Defense and SolarCity Corp. (Nasdaq: SCTY) are also planning to provide solar power to 120,000 military housing units, which would be the largest residential solar cell project in the United States.
Even when the goal is just cheap electricity, solar power is increasingly the technology to beat. Solar is now at grid parity, meaning that it is at least as cheap as other sources of electricity, in places such as Los Angeles, San Francisco, and even Boston. More than 30 million Americans now live in areas where solar power is at grid parity, and that number is expected to rise to 71 million in 2017.
In Colorado this year, solar power beat out natural gas in an open solicitation for a 156-megawatt, 25-year electricity generation agreement. The utility company decided that between the already low cost of solar and the projected doubling of natural gas prices by 2020, a solar power plant is clearly cheaper over the 25 years of the contract.
But as attractive as the U.S. solar market is, some of the biggest opportunities of 2017 will be found overseas.
China alone is expected to install 26.4 gigawatts of solar panels this year, accounting for more than a third of estimated global installations.
And Japan is pushing for more solar to make up for the nuclear power it shut down following the 2011 Fukushima nuclear disaster. The country already has the third-largest solar cell capacity in the world at 23 gigawatts, a number it plans to almost triple in only 15 years.
Perhaps most importantly, India is planning to use solar power to replace its infamously bad electrical grid, which suffers from frequent brownouts and high electricity prices and leaves large numbers of the country's 1.25 billion people without access to any electricity at all. India's 300 days of sunlight per year on average make this transition more than possible.
The Indian government is making a massive push for more solar power, aiming for 100 gigawatts of solar capacity by 2022, up from about 4 gigawatts today. An investment of $100 billion is being targeted toward that goal, and a number of incentives have been made available for developers to speed up the adoption of solar power technology in India.
As you can see, the biggest growth in solar power in the near future will be in Asian countries. But the solar market is huge, with hundreds of companies, large and small, fighting for a share of this global booming market.
While it may be difficult to pick out the winners at this early stage, there is a much simpler, less risky way of tapping into the global solar boom: solar power exchange-traded funds (ETFs). And as the fastest growth in solar power is happening in Asia, investors should focus on funds with significant holdings in China, India, and beyond.
To access my 2017 forecast for oil prices, click here.
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Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, emerging market economic development, and market risk assessment.
He serves as an advisor to the U.S., Russian, Kazakh, Bahamian, Iraqi, and Kurdish governments, to the governors of several U.S. states, and to the premiers of two Canadian provinces.
Moors directs the Energy Policy Research Group at Duquesne University. His six books and hundreds of publications, presentations, and workshops have appeared in 44 countries.
