The Next Energy Sector Collapse — Coming SOON…

by Chris Mayer, Daily Reckoning

"Power utilities now face uncertainty of a kind that traditional phone companies faced when cellular technology emerged," writes Bill McKibben in The New Yorker.

It's an apt analogy. The disruptor in this case comes from solar and other technologies, which reduce the demand for electricity.

Consider this striking observation from Horizon Kinetics, a money management firm based in New York: The U.S. economy has grown in the last six years. Yet electricity demand fell over the stretch -

"a heretofore unknown occurrence in the history of the U.S. electricity demand."

Whenever you stumble on something that has not happened before, you should stop and take a deeper look.

Some of this fall in demand is because the products we use are more energy efficient. A fridge in 1978 used about 1,800 kwh per year. Today's versions use less than 400 kwh. And you can replace an existing 60W bulb with a 13W compact fluorescent or an 8W LED. These are just a few energy-saving changes anyone can make.

And millions of people have made these changes. They continue to make them. McKibben's article kicks off with a story about a family in Vermont. They put a solar array on their roof and switched all of their light bulbs to LED. They also installed new heat pumps.

Before the makeover, the household consumed 3,411 kwh and 325 gallons of fuel oil. After the makeover, it dropped to 2,856 kwh and no oil at all. As McKibben points out, the household reduced their carbon footprint by 88% and at no net cost.

And this is with off-the-shelf technology. You can get this stuff at your nearby Lowe's or Home Depot.

Solar's story is also one that's really astounding. According to McKibben, the price of solar fell 95% in the past four decades and 75% in the last six years. It now produces power as cheaply as coal and gas.

McKibben wrote;

"And because it's a technology, rather than a fuel, the price should continue to fall. As it has for cellphones."

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David Moadel 4 years ago Contributor's comment

Take a look at $XLU vs. $SCTY / $TAN now. How's your long solar / short XLU play working out for ya?

David Moadel 4 years ago Contributor's comment

Take a look at the charts for $SCTY and $TAN... then compare to the chart of $XLU... it's a no-brainer. Go ahead and short $XLU -- I'll gladly take the other side of that trade.

David Moadel 4 years ago Contributor's comment

Garbage article. "the gap between dividend yields and Treasuries have narrowed" So you would take $ZN_F 2.17% over $XLU 3.7%???

Dick Kaplan 4 years ago Member's comment

I disagree but to each their own.