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Commodity Investing

America’s Most Abundant – But Virtually Unknown – Energy “Source”

America’s Most Abundant – But Virtually Unknown – Energy “Source”

by David Fessler, Investment U’s Energy and Infrastructure Expert
Thursday, May 5, 2011: Issue #1506

When you think of abundant energy sources in the United States, what comes to mind? I’m sure you got the easy five: coal, natural gas, wind, solar and geothermal.

Which of these is the country’s most abundant “source?” The answer might shock you. It’s none of them. The leading source is one you probably didn’t even think of. But it provided America with 70 quadrillion BTU’s of energy in 2008 alone… and it provides investors with a great opportunity to still get in while everyone ignores its untapped potential.

Commodities and alternative fuels are all the rage these days. But every energy source has it’s pluses and minuses for both investors and consumers, let’s take a look…

The Environmental Problems of Coal Mining and Natural Gas Drilling

Take coal, for example. According to the World Coal Association, the United States has about 237 million tons of proven, recoverable coal reserves. That’s 23 percent of the world’s total supply. At current usage rates, we can keep the lights on for 275 years.

But on the downside, there’s the greenhouse gas issue. Coal is the biggest source of CO2 emissions. And it’s not just sitting around in piles, either. We have to mine coal. This costs a lot of money, and creates other environmental problems in the process.

Where Coal Comes From Worldwide

Chart courtesy of the World Coal Federation

Well, what about our abundance of natural gas? That’s a great long-term investment opportunity. With the arrival of hydraulic fracturing and horizontal drilling, it’s estimated that we now have 2,587 trillion cubic feet of recoverable natural gas resources. That’s more than a 100-year supply at our current usage rate.

Still, natural gas drilling is all tied up by bureaucrats… and we’re years away from converting all of our cars and trucks over to cheap American gas.

The Downfall of Solar, Geothermal and Wind Power

Good thing we’ve got lots of wind, right? The American Wind Energy Association estimates that we have about 10.4 million megawatts of onshore wind potential. There’s another 4.15 million megawatts offshore. That’s nearly four times the current electrical load of the entire country.

But those are potential numbers. We’d need billions of dollars to build the wind farms themselves. And billions more for the transmission lines…

  • Ditto for solar. There’s plenty of sunshine in the American Southwest. Solar panels are falling in price. They could even become cost competitive with conventional fossil-fuel sources in the next few years. But right now, solar relies on government subsidies in order to compete. That’s an investment for the bold…
  • Geothermal is also a viable source. There are plenty of shallow hot rocks in the western part of the country. The Energy Information Administration (EIA) recently conducted a geothermal resource study. It concluded that nine western states have a combined capacity tos meet more than 20 percent of the nation’s electrical power needs.

But like wind and solar farms, geothermal sources are sometimes far from existing power lines. And they require tons of up-front capital.

So where else should we look?

The Largest Efficient Energy Source in the Country

The most abundant American energy source doesn’t require lots of capital. In fact, it saves capital and allows us to reallocate that money elsewhere. Since the 1970s, the “use” of this source has saved 40 percent of the amount of coal, oil and natural gas that we would have used otherwise. It helps keep those costs down now, as well…

Still confused? Well, I’m talking about “energy efficiency.”

The American Council for an Energy-Efficient Economy (ACEEE) defines it as “the use of technologies and processes to produce the same or better levels of utility (light, space conditioning, motor drive power and so on) using less energy.”

  • Energy efficiency has quietly been our country’s most valuable and abundant energy source since the 1970s.
  • Energy efficiency from economy-wide improvements, along with structural improvements, supplied about 70 quadrillion BTU’s of energy in 2008.
  • That’s more than the energy provided in all the coal, oil and natural gas used in that year combined.
  • The amount of energy it takes to produce a dollar’s worth of finished goods – a measurement known as “energy intensity” – has declined by 50 percent over the past 30 years. That alone has reduced our energy bill by nearly $700 billion.
  • With the right technologies in place, the ACEEE estimates that America could reduce its energy consumption by an additional 25 to 30 percent between now and 2040.

That’s huge. But it gets even more impressive. Due to the inefficiencies in power transmission, saving one watt of energy at the point of use saves three at the point of generation.

And the benefits of energy efficiency are clear. It limits the burning of more fossil fuels, reduces pollution and limits the need for additional power plants. And since it saves money, it’s one thing that those in the government should agree on.

There are many different ways to save energy: More efficient buildings, reducing waste in business and more efficient modes of transportation are shining examples.

Energy-efficient solutions can often be implemented immediately. Replacing incandescent light bulbs with CFL or LED bulbs is a good example of how quickly energy-efficient strategies can be deployed.

Honeywell: An Efficient Energy Mining Company

So what companies are mining the most abundant source of efficient energy?

Honeywell International Inc. (NYSE: HON) is a prime example. Its products include control sensing and security products for buildings, homes and industry.

It also makes turbochargers and other automotive products, specialty chemicals, and electronic and advanced materials. Other divisions design process technology for refining and petrochemicals, and energy-efficient products and solutions for homes, business and transportation.

Energy efficiency is a rapidly growing sector. In 2004, about $43 billion was spent on energy-efficient equipment and services. The ACEEE estimates that number will see a two- to four-fold increase between now and 2020.

I think that number could be even higher. With oil prices on the rise, consumers will want to limit their energy costs. Investors should keep an eye on the latest trends and tap into this huge source of potential.

Good investing,

David Fessler


About

As a degreed electrical engineer, Dave served as vice president of two successful tech businesses: LTX Corporation and Quality Telecommunications Inc. He now provides unique and groundbreaking insights into the energy sector. His new book, The Energy Disruption Triangle: Three Sectors That Will Change How We Generate, Use, and Store Energy, quickly became a best-seller. Dave is the Energy and Infrastructure Strategist for the Profit Trends free daily investment e-letter.

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