It is becoming clear that the world is facing a significant shortage of electricity. In order to meet demand, there has been a resurgence in the use of fossil fuels (coal, natural gas and oil) accompanied by price increases. Despite significant efforts to shift to renewable energy sources, there is a widening time gap between current requirements and the development of cleaner sources.
There is no question that wind and solar generation are growing and will continue to do so. However, in the interim, with overall U.S. electricity generation up 4% for the first six months of 2021, coal is stepping into the breach. Coal generated electricity is up 35% for the first six months of 2021 and accounts for more than 20% of the total. The primary drivers of increased coal consumption are political pressure on oil and gas production and reliability issues specific to solar and wind.
Investors should be considering the availability and price of energy during the current period, when renewable energy is not growing fast enough of to cover the gap created by a growing economy and the “too soon?” curtailment of traditional energy sources.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA