October 18, 2011 at 10:43 AM EDT
Nuclear, Oil, Gas, Renewables - All on Table
We are at the beginning of a massive transition in the way we think about, use, and produce energy. It's ongoing and it's slow-moving... but it's happening.

Ever have one of those moments when you turn on the car and the radio is playing your favorite song?

I had one the other day, only it wasn't a song that was playing. It was noontime talk radio, and an energy investment expert was being interviewed and taking listener questions.

This guy's view of the energy industry was nearly identical to mine.

See if some of what he had to say sounds familiar:

We are living in a carbon era. There's lots of hydrocarbon molecules out there. We're going to be in a hydrocarbon era for a long time. But yes, there is a growing green sector. The bad news is that it is a very, very small, miniscule energy sector in the totality of... the whole world's energy budget.

The good news is that green is going to grow. And so if you get into the right kinds of energy plays, in the right kind of green companies, you could leverage your funds and you could grow things a lot more.

I was encouraged, to say the least. This is the message we've been shouting for almost a decade.

And it's finally making it to daytime talk radio.

I called for triple-digit oil, said there was no “silver bullet” solution to our energy problems, and championed cleantech's ascension all in the same article — in 2007.

It was the fourth article I'd written for this column.

And though I've written hundreds since, the message remains the same: We are at the beginning of a massive transition in the way we think about, use, and produce energy.

It's ongoing and it's slow-moving. But it's happening.

And the rest of the world, as the expert mentioned above, is starting to catch on.

~~eac_nuclear1~~

When you're that early to the show, you have to wait a while for the main act. But that's just fine for in-the-know investors. All the various energy acts to come will generate above-average returns.

The mantra remains the same as it was in January of this year, when I reminded you the days of cheap oil were behind us and told you the scramble was on to find replacements, urging you to:

Buy it if it burns (or otherwise produces a net energy gain or increases efficiency)...

Because the solution to Peak Oil, as many countries are proving, isn't more hard-to-get oil — though that will continue to be profitable for some time...

Instead, there will be multiple solutions to fill the gap left by disappearing oil production — and to fill the pockets of wise investors.

Indeed, we're seeing that play out each and every day. In the last two weeks alone we've seen:

  • Chinese oil company Sinopec (NYSE: SHI) buy Canadian oil and natural gas producer Daylight Energy (TSE: DAY) for $2.1 billion. The purchase doubled shares of Daylight and gave the Chinese access to Alberta.

  • Dow Chemical (NYSE: DOW) unveiled its solar roof shingles, saying they'll generate $1 billion in revenue by 2015.

  • Statoil (NYSE: STO) paid $4.4 billion to acquire Brigham Exploration (NASDAQ: BEXP). The deal gave Statoil access to the coveted Williston Basin and sent Brigham (a Keith Kohl pick) up 20%.

  • BP (NYSE: BP) announced it will invest $800 million to build the largest wind farm in Kansas.

  • Superior Energy Services (NYSE: SPN) bought Complete Production Services (NYSE: CPX) for $2.7 billion, giving it access to the Marcellus, Bakken, and Fayetteville shale formations.

  • GE (NYSE: GE) said it would build the largest solar factory in the United States. Larger than 11 football fields, the Colorado facility will make cadmium telluride thin-film solar cells, similar to those made by First Solar (NYSE: FSLR).

Buy it if it burns. The world's largest companies are.

I have a history of being early and right, and my words from one month ago still stand:

As we approach the peak (we're approaching it, folks, let's move past that nonsensical debate; the CEO of Total (NYSE: TOT), the sixth-largest oil company in the world, said this year we'll reach the peak of oil production in five years), you'll want to own the companies that stand to profit by recovering oil that will then be worth well over $150 per barrel.

That would be any company that accesses or helps access deepwater oil, arctic oil, shale and sands, and any remaining conventional deposits.

It's why Bakken stocks were and are so hot. It's why fracturing stocks are so hot. It's why tiny companies with access to the last big African fields are so hot.

And as energy prices continue to increase as we move further into the peak, alternatives will start to become more and more competitive.

It's not an either/or; it's an and/when.

The opportunities are aplenty. You just have to know where to look. And you have to look there before everyone else.

So when I heard the radio host ask the following question, I had to chuckle:

I wanted to ask you about nuclear before we moved on. In terms of the nuclear power industry post-Fukushima, here we are and it's October now, what's your general view of it long-term? Are we going back? Are we going to see more nuclear or what? What's going to happen?

Here's the answer — the same answer I've been giving you since the earthquake in March:

I don't think we're going to go back very far. Obviously Japan is a mess. But for as much of a mess as it is in Japan, other parts of the world other people, other countries are still going at it full bore. There is still a very large installed base of nuclear systems around the world. Uranium is a critical element, so to speak, of that energy cycle.

And come next year, or 2013, there will be a very severe uranium shortage around the world because we're basically going to run out of nuclear war heads from the Cold War that are now being recycled down.

My thoughts exactly.

But I had to pinch myself after what he said next:

I would say that uranium plays still have a lot of life in them looking out into the medium and long term. And then there is just some astonishing technology that's going on with combining the element beryllium with uranium, in terms of building safer fuel rods. Essentially, fuel rods that won't melt down because of the heat flow characteristics of the beryllium.

I didn't think it would be a mainstream story so quickly.

~~nuclear_signup~~

Call it like you see it,

Nick Hodge

Nick Hodge
Editor, Energy and Capital



Nuclear, Oil, Gas, Renewables - All on Table originally appeared in Energy and Capital. Energy and Capital, a free 3x-per-week newsletter, offers practical investment analysis in the new energy economy.
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