Owning the right energy assets at the right time can make you a fortune.
The entire 20th century is a case in point.
Those oil barons of the late 1800s — historic names like JD Rockefeller and JP Getty — made dynastic wealth by investing early in the wild days of the US oil industry.
But my favourite story is probably that of Haroldson Lafayette Hunt…
Hunt was a maths whizz who worked on a cotton plantation. It was back-breaking work, and Hunt wanted more out of life.
So, in a desperate move, Hunt — with only $100 to his name — travelled to New Orleans and bet it all on a poker game.
Using his maths chops and riding his luck, Hunt turned this $100 grub stake into $100,000!
Yeah, I know, it sounds like the plot line of some cheesy Western.
But it’s what happened.
And Hunt showed that it wasn’t just dumb luck with his next move.
You see, he used his newfound wealth to take a punt on the emerging oil industry, buying the East Texas Oil Field.
An investment which went on to earn him millions.
Hunt was an investor after my own heart — a calculated risk taker. Though, obviously, a bit richer than me!
Anyway, my point is…energy transitions, though rare, are incredibly profitable.
And there’s no doubt we’re living through one of those rare moments right now.
So, how can you play it?
There are a few well-known investment ideas out there.
But today, I want to alert you to an opportunity in the energy space you might not have heard of yet.
It promises to be an important part of the puzzle…
The elephant in the room
Yep, while the 20th century was the century of oil, it’s clear the 21st century won’t be.
But what comes next?
Solar and wind seem to be the favourites from a power generation perspective.
But there’s an elephant in the room that’s rarely discussed by advocates of these two approaches.
You see, wind and solar are intermittent power sources. To fix that, you need batteries to store power for when the sun isn’t shining or the wind blowing.
The problem here is that we just don’t have enough raw materials to create the batteries required for this massive shift.
At least, not on the timeline countries seem to be committing themselves to with green energy targets.
As reported by the International Energy Agency:
‘According to the Sustainable Development Scenario of the IEA (International Energy Agency), by 2040 the demand for cobalt will increase 21-fold, nickel 19-fold and lithium 42-fold for the manufacture of batteries, especially those used in electric vehicles.
‘As such, there is a risk of a mismatch between the expansion of mining and the needs of the energy transition.’
It’s going to be almost impossible to fix this mismatch.
This is a very dangerous fact to ignore.
If we ignore it, we could be setting ourselves up for a future of energy shortages.
A bit like Germany experienced last year when left to rely on its nascent renewable industry after Russian gas was cut off.
I don’t think many countries will want to leave themselves open to that risk.
Which brings me to the big news from last week.
The announcement read:
‘GE Hitachi Signs Contract for the First North American Small Modular Reactor.
‘GE Hitachi Nuclear Energy (GEH), Ontario Power Generation (OPG), SNC-Lavalin and Aecon have signed a contract for the deployment of a BWRX-300 small modular reactor (SMR) at OPG’s Darlington New Nuclear Project site. This is the first commercial contract for a grid-scale SMR in North America.’
Small modular reactors (SMRs) are the next generation of nuclear power plants.
And, as the name implies, they’re a far cry from the big, ageing nuclear power plants of yesteryear.
Here’s what a facility looks like:
Not much of an eyesore, is it?
But while it might look small, a 300 MW reactor can power 250,000 US homes!
This is reliable, cheap, green, base-load power to help supplement other renewable energy sources like wind and solar.
And some are clearly excited by its potential…
The ultimate green energy
As a recent report by White & Case explained:
‘SMRs are now gaining the attention of governments and power providers across the world because of the optionality they offer.
‘They can provide reliable energy in the form of both electricity and heat.
‘The heat can help lower the emissions from carbon-intensive industries such as steel and cement making, while the power offers baseload energy that can help underpin more intermittent supply from renewables such as wind and solar.
‘The SMR offers a step change from the existing world of nuclear power.’
Even famous film director Oliver Stone debuted a film — Nuclear — at the recent Davos conference.
The film touts nuclear power as the most viable solution to climate change.
Oliver Stone said at an interview:
‘We had the solution [nuclear power]…and the environmental movement, to be honest, just derailed it.
‘I think the environmental movement did a lot of good… [I’m] not knocking it, but in this one major matter, it was wrong.
‘And what [the environmental movement] did was so destructive, because by now we would have 10,000 nuclear reactors built around the world and we would have set an example like France set for us.’
Now, I don’t really care what a Hollywood director thinks of anything really…but it’s an interesting change in the zeitgeist.
And it might stir up more public conversations on the topic.
Of course, these new nuclear reactors have their critics too.
Many say they’re too expensive, dangerous, and the development lead time too long to play any meaningful role in the green energy transition.
These people argue solar and wind combined with batteries are a better bet.
Though, like I say, they never seem to deal with the problem of raw material supply for said batteries.
Anyway, there’s a very detailed critical report here you can read if you want to dive deeper.
No doubt, there’s a lot of entrenched positions on both sides.
But as the old saying goes, actions speak louder than words.
And I think the GE announcement was a seminal moment in that regard.
It’ll pave the way for further SMR developments and help us move to a world of clean, green, cheap, reliable energy.
So how can you invest in it?
Try this out
Well, my colleague Ryan Clarkson-Ledward and I uncovered a key rare resource, essential to this new nuclear tech.
No, it’s not uranium!
But it is something a select few Australian miners DO have exposure to.
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Editor, Money Morning