Investing In Energy -- An Open-Book Test -- June 21, 2016

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Thinking out loud. At the moment, investing in energy seems to be an open-book test. I was thinking about that all day. Just before posting, I thought I would loo at crude oil futures: solidly above $50.

I think the biggest news today was PG&E's decision to kill their two-unit nuclear power plant; the plant will abruptly end by 2025. You know, that's not all that long from now.

California won't be building any new nuclear plants in the next ten years. If ever.

It's funny how things worked out. A couple years ago, utilities were building terminals along the Gulf Coast to import natural gas. There is now such a glut of North American natural gas, those terminals have been "reversed" and the US is now exporting natural gas.

The tea leaves suggest we will see no shortage of natural gas for decades.

Hold that thought.

PG&E says it makes no sense to maintain nuclear power. With all the non-dispatchable, unreliable solar energy and wind energy coming on board, PG&E needs some type of dispatchable, reliable power supply to back up that energy.

It turns out, nuclear power plants are too slow to respond to an unpredicted loss of wind or solar energy. Of course, coal is out.

That leaves one energy source: natural gas. But one needs natural gas plants that can turn on a dime -- as they say. Oh, what have we here? GE has come up with the solution:

Indigenous technology from General Electric enables the turbine plant to reach full power in less than 30 minutes. This saves energy by allowing partners to respond quickly to fluctuations in grid demand, integrate renewable energy onto the grid and adapt quickly to weather changes. Consequently, the plant helps to conserve natural gas and reduce greenhouse gases, allowing France to meet Europe’s climate and energy guidelines.  

This stuff is so good, GE is now in the Guinness Book of World Records. 

PG&E says they will replace the power lost from the Diablo Canyon nuclear power plants with wind and solar energy. That's fine. Every wind power plant / every solar power plant needs back-up; and that back-up is going to come in the form of a) natural gas; and b) GE technology.

Investing in energy? Seems like an open-book test for those with a long horizon, say ten years.