Summary
Look for IPOs and major companies who are interested in integrating energy and transportation into an electric powered, autonomously controlled, personal transportation system. Older coal plants will be replaced by new technologies like IGCC with higher efficiency. Engineering retrofits will improve heat rates and reduce carbon emissions per unit of energy. Cap and trade will be heavily regulated to prevent the abuses and 'gaming the system' we recently saw with mortgage derivatives, that led to the banking crisis.
Analysis
As an investor of my own IRA I follow a hedge fund based on Energy companies, looking for signs there will be a 'winner' in the global warming/climate change debate. My view comes from experience in coal combustion over the last 30 years, but also looking at alternate energy production, finance, and policy.
One side that is not often expressed is the interconnection between transportation and energy. My efforts are directed toward a new system that integrates energy and transportation into a system for storage and distribution of electricity by conducting pathways that can be used for personal transportation. Think about it. We drive on highways using inefficient combustion engines, and right beside that highway is an electric power line, with much lower carbon emissions and higher efficiency of production, yet we cannot access it from our current vehicles. I believe in the future we will realize the dream of integrating our electricity transmission system with our transportation modes, in urban centers as well as inter-state, to realize electric powered, autonomously guided, personal transportation. This will allow redistribution of power to where it is needed in a disaster or power outage, give me back my commuting time for personal reflection and not piloting, improve safety, and remove congestion and pollution in urban areas. I recommend investment in plug-in hybrids, energy storage, and forward-looking IPOs integrating energy and transportation systems into a system of personal regional transportation..
Coal can be burned cleanly and the newer plants have all but eliminated acid rain emissions. Now we are planning efficient power plants with low CO2 emissions, and with IGCC and other new technologies, it will be possible to dramatically improve the efficiency of coal use, producing more kilowatt hours per pound of coal, capping our net amount of CO2 emitted . I look for investments in new coal plants to increase, replacing older, less efficient plants on the same sites, improving the overall efficiency of coal use. When you think about it, efficiency improvements (Heat Rate) will become the number 1 concern of all electric generators in the cap and trade world. Companies that engineer efficient plants and retrofit older plants will profit.
I'm also concerned about cap and trade being in the hands of the same people on Wall Street that brought us the mortgage and banking failures through rampant, and some say criminal, levels of speculation and subterfuge. There shall be regulations to prevent speculation and gaming the system. I am in favor of a cap of $10 a ton on CO2 so speculators can't profit from non-existant futures trading. Electricity is a necessity, and it scares me to think these speculators will have control of the carbon market. I believe we will see regulations to prevent such profiteering of public utility credits, and reduce the profitability of financial companies.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
