Sectors: Energy Market

 

The 21st century will be marked by the increase in the global demand for energy and supplying that demand with profitable solutions will be one of the highest growth sectors within the global economy.

According to the Energy Information Administration the global demand for electric power is expected to increase from 14.8 trillion kilowatt-hours in 2003 to 30.1 trillion kilowatt-hours in 2030.  Currently, the world generates the vast majority of its energy from fossil fuels such as coal, oil and natural gas.  Only a sliver of the global demand for energy is met through renewable alternatives, however this sector is growing considerably in high energy consuming markets.

There are several trends in the energy market that will be the basis for investment decisions.

• Fossil fuel prices are accelerating due to supply limitations
• Marked increase in consumption
• Increased awareness of climate change

Fossil fuels are finite resources and as the supply reduces and demand further increases we can expect an increase in fossil fuel prices. The increase in the fossil fuel price will benefit both the investor in fossil fuel markets as well as the investor in alternative energy and smart grid markets.

As the price of fossil fuels rises the consumer will be faced with a higher costs for energy. The main obstacle facing alternative energy is what is called reaching “grid-parity”. Today, alternative energy is more expensive than the traditional forms of energy, but as fossil fuel prices accelerate, alternative energy such as solar, wind, biomass and geothermal will become more affordable and more profitable.  In addition to the alternative energy market the consumer will have greater control over their energy use to reduce their consumption and lower their costs. Smart grid technologies enable the user to reduce energy consumption during peak hours when it is more expensive and lower their overall costs. 

The increased awareness of climate change is another contributor to the growth of alternative energy in the long run. With the help of government incentives, alternative energy will grow exponentially to meet more of the global energy demands as well as the global demand for environmental stability.

The energy market will see considerable growth in all sectors due to the sharp increase in consumer demand. However, the key will be to recognize, which sectors will grow the most relative to the industry average.