Something we all use and probably don’t think too much about, except when the bill comes or someone talks about renewable energy and climate change.

It is probable that electricity consumption will increase, at least in total if not on a per capita basis.

Investors should consider how we are going to meet demand while adopting a rational approach to the issue of climate change.

There is a lot we don’t know, but some of the key issues are generally understood and somewhat predictable.

In the U.S., coal use has declined while natural gas use has increased.  Ten years ago, coal was the dominant source for electric generation.  In 2015, natural gas caught up, with each accounting for approximately 33% of U.S. generating capacity.  Over the last decade, nuclear has been relatively constant, at approximately 20%, and oil is almost invisible.  Renewables accounted for approximately 13% in 2015, with hydroelectric coming in at 7%, and solar and wind at 6%.

Worldwide, coal continues to be the primary fuel for electric generation.  Both China and India, with very large future energy requirements, are busy building new coal fueled electric generation stations.  Even Germany, a long time advocate of environmental responsibility, has increased its dependence on coal as a consequence of its move away from nuclear following the March 2011 accident in Japan.

Based on current technology, nuclear appears to be the only scalable alternative to fossil fuels.  While solar and wind generation is likely to continue to increase, scalability has proven to be a material challenge.

Investors, with a view to the future, may want to consider the potential for significant gains in battery technology.  A truly cost effective battery, or other storage system, would be very helpful in efforts to expand the role of wind and solar.

All comments and suggestions are welcome.

Walter Kirchberger, CFA®