Welcome to our Friday mailbag edition!
Every week, we receive fantastic questions from your fellow readers. And every Friday, I answer as many as I can.
But before getting into our mailbag edition, I first want to put an event I’m hosting on your radar.
It has to do with what I’m calling “Biden’s Stealth Plan for America 2024.”
While most Americans have been distracted by the latest scandals… bank failures… and a panicked and volatile stock market…
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That’s why tomorrow, Saturday, July 15 at 10 a.m. ET, I’m going on camera to reveal critical details of what’s behind Biden’s plan for 2024… why the media is barely reporting on it… and why it’s set to unleash a staggering $4.9 trillion windfall for people who know about it.
I’ll also give away the name and ticker symbol of my best pick at the center of this massive opportunity – for free.
Simply RSVP with one click here.
Now, back to our mailbag issue…
Up first today, a question from an anonymous reader on the laws supporting our country’s power grid system…
You mentioned that the Inflation Reduction Act provides money for Texas to update its power grid. Can you expand on that? What other laws and initiatives are policymakers working on to strengthen our electric grid system – and energy structure in general?
– Anonymous
Hi, thank you so much for those excellent questions. They really strike at the heart of the energy landscape.
In order for the U.S. to meet energy demand domestically and around the world, it needs to have more efficient power grids to distribute the energy supply.
The U.S. also needs upgraded power production facilities. That’s especially the case for Texas, which is the second-most populated state in our country and one of our largest energy exporters.
First, let me address the Inflation Reduction Act (IRA) as it relates to Texas.
According to the White House, the IRA will bring an estimated $66.5 billion of investment into large-scale clean power generation and storage to Texas between now and 2030.
These projects focus on portions of the Texas power grid that are in dire need of upgrades.
In addition, the White House claims that the IRA will provide subsidies to make it more affordable for Texans to purchase more energy-efficient appliances and renovate their homes in an energy-efficient way.
This is in the form of rebates that will cover 50-100% of the installation costs of super energy-efficient heat pumps, water heaters, clothes dryers, stoves, and ovens.
Plus, the IRA provides tax credits covering 30% of the installation costs of solar panels and battery storage systems. It also provides credits for upgrading heating and cooling equipment. No income limits apply.
The IRA also includes tax credits of up to $5 per square foot for small businesses incorporating energy efficiency improvements. All of these subsidies would reduce stress on the power grid.
There are various other measures that Texas has passed to update energy infrastructure, including the power grid.
For example, $525 million in funding was allocated to Texas infrastructure resilience projects in 2022 alone. Those funds would go towards ensuring the electric grid is more secure. And I expect more funds to be allocated for such projects going forward.
In addition, the Texas State Legislature just passed two legislative bills this month allocating $7.2 billion in loans and grants to support the Texas electric grid and energy market. Those loans and grants provide funding for backup energy efforts that include more efficient natural gas production.
This initiative aims to strengthen the power grid against weather or energy demand emergencies. What’s more, the funding will enhance communication technology between the state’s natural gas and electric systems.
Beyond Texas, the federal government is also putting forward legislation focused on natural gas, such as the bipartisan bill for the Natural Gas Export Expansion Act. The bill is designed to speed up the federal approval process for exporting liquefied natural gas (LNG).
The bill would also increase free trade efforts with our allies – especially for European countries under pressure due to Russian gas shutoffs. That legislation would also strengthen U.S. energy security, reduce emissions, and enhance American strategic and economic relationships with our allies.
Remember, power in the form of energy means power in the geopolitical arena.
Next, reader Peter wants to know about green energy’s role in keeping up with the world’s increasing energy demand…
Where does green energy fit in with the increased demand for electricity? What combination of energy sources will we focus on to generate more electricity moving forward?
– Peter C.
Hi, Peter. Thank you for your questions!
As things stand right now, there still isn’t adequate renewable energy to meet our world’s skyrocketing energy demands.
That’s because solar and wind projects can’t provide reliable baseload power. We all know that the wind doesn’t always blow, and the sun doesn’t always shine.
Look no further than California…
In recent years, the state began to rely heavily on renewable energy sources. But in 2020, during a heatwave, the state faced rolling blackouts due to a reduced presence of gas-fired power plants. The reduction in solar power production during evenings made these energy shortages worse.
So it’s clear that the state’s transition from gas-powered plants occurred too quickly.
But this problem extends beyond the golden state.
For instance, California imported power from neighboring states during peak demand periods. But the closure of fossil-fuel plants in those states put a cap on their capacity to offer extra power.
No matter how you feel about fossil fuels, we’re just not ready to turn off one of our main sources of consistent power without an adequate backup plan.
These days, companies are still grappling with building wind and solar projects fast enough to compensate for the shutdown of older “fossil-powered” plants. One reason for this is the lengthier approval process required to connect them to the existing electricity grid.
And to make matters even worse, there’s a wave of coal power plants being decommissioned. Over the next 25 years, more than 130 coal power plants in the U.S. are set to go offline.
Remember: fossil fuel baseload power is there when you need it. Day or night. Rain or shine. Windy or calm. Regardless of the weather, it’s always ready to perform.
And the demand for electricity only keeps increasing. Other states might not be dealing with rolling blackouts right now, but if they don’t do something about it soon, they’ll be facing these same issues.
Now, let’s move on to your next question about the energy sources we’ll focus on to “generate more electricity going forward.”
Before I get into that, let me be clear: the shift to clean energy is already happening. The transition to build renewable and sustainable energy sources is underway.
At the same time, it’s important to understand that it won’t happen overnight. Right now, renewables aren’t ready to take the reins on worldwide energy demand.
Between 2021 and 2050, global demand for electricity is forecast to grow by 68%.
And based on what we’ve witnessed in terms of the energy transition so far, we’ll still need fossil fuels in the future. So both fossil fuel and renewable energy projects are needed to meet the world’s growing energy demands.
I also believe that nuclear and natural gas both have a special role in that future.
First, natural gas is a perfect bridge between today’s fuels and New Energy technologies. That’s because natural gas infrastructure could be repurposed for low-carbon fuels such as hydrogen and biogas.
Natural gas also produces significantly less greenhouse gas emissions than other fossil fuels. According to the U.S. Energy Information Administration (EIA), it emits between 45% and 55% less greenhouse gas emissions than coal when used to generate electricity.
Companies like global energy giant Shell are betting on natural gas as the most promising transition fuel.
Even though it’s considered an oil major, Shell produces much more natural gas than oil. In 2021, Shell produced 344 million barrels of oil equivalent. Eighty-three percent of that was natural gas.
I also see the role of nuclear energy expanding. Recently, the International Energy Agency (IEA) recognized the role of nuclear power in helping countries shift to New Energy economies. That’s because nuclear power can help countries reduce their reliance on fossil fuels.
While mining and processing uranium isn’t exactly carbon-emissions free, nuclear power itself is completely zero-emission.
Granted, global acceptance of nuclear energy will not happen overnight, either.
But an increasing number of countries around the world are starting to realize that… which is why I think we’ll see more nuclear power in the years to come. At writing, there are 60 new reactors under construction around the world.
Even in America, nuclear power is getting a new push because of our current energy crisis. Policymakers on both sides of the aisle are seeking to prolong and expand reactor use.
Just this past May, seven new nuclear energy bills were unveiled in the House and Senate. As I write this, a bipartisan bill is moving through the Senate, aimed at bolstering our domestic nuclear prowess.
It’s clear that the U.S. government is focused on securing energy independence for itself and its allies.
In fact, policymakers are finally enacting laws that will help bring about energy security… And cement the U.S. as the king of energy for decades to come.
We’re about to see billions of dollars flood into certain energy stocks. And investors who position themselves early can reap massive profits.
For more details about how to benefit from the changes in the energy sector, make sure you sign up for my upcoming event tomorrow at 10 a.m. ET. Register with one click here.
Finally, our last question this week comes from reader Joanna who wants to know about the future of energy prices…
Will energy prices ever come down? Or is this the “new normal”?
– Joanna K.
Hi Joanna, thanks so much for asking a question that is on the minds of many readers.
The short answer is – no, I don’t believe energy prices will come down for any prolonged period. In other words, this is the new normal.
But let’s dig into what that means…
First, the last two times we had a significant decline in energy prices was in the wake of the global financial crisis and recession of 2008-2009. The second was when the world shut down in the wake of the 2020 pandemic.
In both of these circumstances, there was an acute event that caused a drop in energy prices. And of course, we can see another such event that would have a temporary dampening effect on energy prices.
However, energy prices do bounce back after these types of events.
Plus, an array of experts and Wall Street analysts that trade energy commodities, from the EIA to my old firm Goldman Sachs, all believe energy prices will continue to rise.
For instance, when we saw oil prices rise above $100 per barrel last summer, EIA administrator Joe DeCarolis said, “Although we expect the current upward pressure on energy prices to lessen, high energy prices will likely remain prevalent in the United States this year and next.”
Earlier this year, Goldman Sachs said, “Oil will top $100 a barrel again this year, and by 2024 we could have a serious problem. Don’t be surprised by pain at the pump. Oil will rise back above $100 a barrel this year and may face a serious supply problem in 2024 as spare production capacity runs out.”
There are four main reasons energy prices will remain relatively high:
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Geopolitical turbulence
The Russian invasion of Ukraine continues to hamper the supply of oil and natural gas. Existing sanctions also translate to lower Russian oil and natural gas exports. This means current importers will still need to make up for this missing supply.
Currently, about 80% of global energy comes from fossil fuels, such as coal, oil, and natural gas. Natural gas fuels about 25% of global electricity consumption. And in 2022, U.S. companies provided half of Europe’s liquefied natural gas supplies and 12% of its oil.
The longer the Ukraine war goes on and sanctions continue, the more demand we’ll see for alternative energy sources. And that will push prices up globally.
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Lack of energy capacity due to time and cost
It takes time to upgrade and build energy production grids, refining, and distribution infrastructure.
In Texas, where there are fewer regulatory hurdles for building power plants, the time to build facilities can be as little as two years. But in California, due to higher regulatory time hurdles and costs (to comply with its tighter emissions standard), time-to-build can be more than a decade.
Plus, power generators that run on fossil fuels tend to have higher operating costs than nuclear or renewable power generators. That’s why they are sensitive to underlying fuel prices. So building these facilities gets more expensive as energy prices rise.
And those costs are then passed on to energy consumers to make up for the difference. In other words, it’s a vicious cycle…
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Heat
Just last week, the world recorded its hottest day ever. As long as temperatures rise in the summer, demand for electricity will rise as well. That demand can eat into existing storage and supply. And that produces higher prices.
According to the World Meteorological Association, global temperatures are set to keep smashing records – for the next five years, at least. Also, El Niño patterns – such as the one we are seeing now – can increase global temperatures the year after they hit.
That means 2024 might be even hotter than this year.
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Economic and population growth
Through 2050, global residential and commercial energy demand is forecast to rise by 15%. Developing countries make up the lion’s share of that demand. That’s because their more rapidly growing populations and economies require more energy.
For instance, Chinese demand is expected to rise as China moves past its Covid-zero policies. India’s energy demands are also rising. It’s why average worldwide household electricity use will go up by about 75% between 2021 and 2050.
The bottom line is, the more electricity we use, the more that energy prices increase. And all of the facts reveal that we’re experiencing a boom in energy demand.
The U.S. government knows this. That’s why it’s doing everything in its power to secure the supply of energy sources and ensure U.S. energy independence.
In fact, policymakers are enacting laws that will help cement the U.S. as the king of energy for decades to come. And these laws will open the floodgates for billions of dollars into a handful of energy stocks.
That’s why I’m going on camera tomorrow, Saturday, July 15 at 10 a.m. ET to explain what’s about to happen in the energy sector… and how you can profit from the realignment in global energy powers.
If you haven’t yet, reserve your spot for my event with one click here.
And that’s all for this week’s mailbag. Thanks to everyone who wrote in!
If I didn’t get to your question this week, look out for my response in a future Friday mailbag edition.
I do my best to respond to as many of your questions and comments as I can. Just remember, I can’t give personal investment advice.
And if there are any other topics you’d like me to write about, I’d love to hear from you. You can write me at [email protected].
Happy investing… and have a fantastic weekend!
Regards,
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Nomi Prins
Editor, Inside Wall Street with Nomi Prins
P.S. As the world scrambles to secure more energy, a handful of little-known companies could profit the most.
I believe we could see gains as high as 3x… 5x… and perhaps even 7x our money or more…
That’s why tomorrow at 10 a.m. ET, I’m going on camera to reveal how you can profit from the massive energy shift… and why it’s set to unleash a staggering $4.9 trillion for people who are prepared for it.
I’ll also give away the name and ticker symbol of my best pick at the center of this massive opportunity – for free. Simply RSVP with one click here.