In today’s Money Morning…this has always been my issue with these energy events populated by world leaders…weaponised energy assets…a decentralised opportunity…and more…
I’ll be honest, I only half-heartedly followed the COP26 climate summit.
It was an event that was meant to set the stage for the world’s energy transition towards net zero by 2050.
But, depending on who you ask, ‘net zero’ can mean a lot of different things…
And this has always been my issue with these energy events populated by world leaders. They’re simply a whole lot of talk and no action. Because wouldn’t you know it, each and every nation in attendance has very different energy needs and goals.
That’s why it always devolves into a whole lot of posturing and commitments.
The kind of conclusions that are more often than not meaningless in the long run. Which is a shame, really.
I certainly believe, from my own analysis, that the world has a lot to gain from the forthcoming energy transition. Which embraces the incredible potential of new technologies across renewable ventures, energy storage, and even more ambitious projects like mining the Moon for helium-3.
Suffice to say, the future for energy is extremely interesting and promising.
It is simply a question of how and when these technologies will be utilised. As well as the ever-pressing issue of bridging our energy needs until such technology is economically viable.
Trouble is that this already complex process is just being exacerbated by the non-stop politicking…
Weaponised energy assets
The inherent problem with energy is its ties to state governments. A situation that was, by design, necessary from the outset of the industrialised world.
Without government help, setting up the massive grids and infrastructure for widespread energy distribution would have been a nightmare — not to mention, extremely costly.
And while many of these grids have since been privatised, governments still find ways to intervene and weaponise energy markets for their own end.
All you need to do is look at what is happening in Germany right now to see that.
Both Belarus and Russia are using natural gas supplies as a political tool for their own agendas, with the now completed but not yet online Nord Stream 2 gas pipeline potentially in jeopardy.
This has led already high gas prices to jump even higher. Rising by 17% on Tuesday alone, after fears that the pipeline may not be approved ahead of winter. A scenario that is being made worse by Germany’s own government taking issue with the ownership of the pipeline by Gazprom, a rather notorious state-owned Russian gas supplier.
Meaning that everyday people, who probably couldn’t care less about these feuding politicians, will freeze. With the added pressure of COVID-19 cases on the rise too.
Needless to say, it is a complete mess.
The kind of situation that highlights just how little politicians care about energy security.
Because at the end of the day, this fundamental industry is just a tool for them — a means to secure their own political end. And for that reason, we should all be concerned about just how secure the future of energy will be.
However, there are still some glimmers of hope for the future. Not just in the way we source our energy, but also in how we supply it.
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A decentralised opportunity
See, one of the more fringe but exciting announcements to come out of COP26 was from Rolls-Royce: The historic automotive company that is now setting its sights on customers’ energy needs.
In fact, they are planning to offer a solution that they’re dubbing ‘Energy-as-a-Service’.
Utilising the ever-popular business model of many software start-ups for people’s power needs.
As Rolls-Royce’s Vice President of Power Systems Andreas Görtz declared:
‘Energy-as-a-Service is particularly interesting for companies that need to adapt their energy supply to new circumstances — be it an expansion for which more power is needed or an adaptation to new regulatory requirements, such as emissions guidelines,
‘Because this often involves investing in equipment, such as a microgrid, that requires expertise to operate, it’s a challenge for customers to do this on their own. By offering Energy-as-a-Service, we can help them overcome that challenge.’
You can no doubt see how this could be a very lucrative idea — offering a solution that provides more energy independence to customers who need it. Particularly if they’re in a location that may not be able to tap into a national energy grid.
But as Görtz’s comments allude, this is mainly for businesses. Not the kind of service that your average individual will likely be offered.
Granted, that doesn’t mean that these kinds of efforts aren’t also being worked on…
TenneT, an energy transmission network operator, is trying to shake up the Dutch and German power sector. Pioneering blockchain-enabled, decentralised energy solutions. Making use of battery storage to cater not only for consumer consumption of energy, but also generation.
As a result, users can feed excess power from their own generators or energy storage solutions back into the grid — for a tangible profit! All of which is handled and documented on a blockchain ledger.
The hope is that by doing this, the grid will be able to absorb bottlenecks better. Making use of excess power when it is needed most. A concept that I suspect will pave the way for far more radical decentralised energy solutions in the years to come.
After all, it is clear in my view that the less influence governments have, the better.
And these market-based solutions will be just as exciting as a shift in energy itself. This will allow for more flexible exploration of alternative fuels or technologies if need be.
All of which makes for a compelling opportunity for investors too.
Because at the end of the day, none of this will be possible without large sums of capital. But it certainly will be money well spent if it means ridding ourselves of political interference.
Editor, Money Morning
PS: Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.