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Joseph L. Shaefer
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Chief Investment Officer for Stanford Wealth Management, a Registered Investment Advisor. Retired senior executive of Charles Schwab. Retired (36 years) active and reserve military service -- six in special operations, 30 in the intelligence community. Geopolitical analyst. Author -- investment... More
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Stanford Wealth Management
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The Investor's Edge
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Bringing Home the Gold
  • Solar and Wind Power in Germany: A Model for the US? 0 comments
    Sep 27, 2010 4:50 PM | about stocks: XOM, RDS.B, CVX, STO, BP, WFT, SDRL


     I have been on business and holiday in Germany this past week and, having heard so much about how far ahead of the US Europe, and particularly Denmark and Germany, are in their adoption of alternative energy, I was looking forward to seeing these sources in action and observing how much cleaner the air would be.  (I’ve visited many times, having spent about 8 years of my life in Europe.)

     

    My first observation: Like the old cliché about politics, all truly efficient power generation is primarily local.

     

    My second: Eschew no source of energy in favor of any other.  If you have 6 sources, use them all.

     

    I grew up partly in Norway, where they have plenty of oil in the North Sea.  So they gather it.  But they also have plenty of hydroelectric onshore.  About 97% of Norway’s electricity is produced by sliding a turbine underneath a powerful, plunging, ever-running waterfall.  So they use it.

     

    In Germany, they don’t have oil and only miniscule amounts of natural gas.  So they use intermittent solar, intermittent wind, and more steady compressed fuels in the form of imported oil and gas and domestic coal.  It just makes sense.

     

    I have discovered from writing previous articles that some commenters vehemently believe using the compressed forms of fuel that fossil fuels represent is evil or destructive.  In a recent two-part article on the BP oil spill, I noted that marine biologists, the US EPA, NASA, et al agree that the natural seeps that enter the world’s oceans every year dwarf man-made spills and that nature has evolved micro-organisms that actually feed on these natural and man-made spills.  Their populations bloom when there is more food for them and contract when that food supply dwindles.  That’s not to suggest we would want any man-made spills.  “Them little critters will just have to make do with the natural stuff.”

     

    Eschewing fossil fuels without having a dependable energy source with which to replace them, however, is as dumb as failing to research alternatives against the likelihood that, some day, man will finally use up all those compressed energy sources Mother Nature worked so hard to provide.   I believe there are far better investment  opportunities among the oil, natural gas, coal, and uranium companies and the oil and gas servicing and leasing firms than among most alternative energy firms.  Those more interested in using Seeking Alpha to push their political or social beliefs may have forgotten that this site is all about investing.

     

    It is the intermittency of alternative energies, at least with our current collection, storage and distribution capabilities, that I find troubling.  Certainly we can use wind energy to push water up a hill then, when we need it, release the water to power a hydroelectric turbine.  But is that as efficient as, say, compressing natural gas for fuel?  We have the technology to do just about anything, but – at what cost, in dollars and in efficiency?  Shouldn't "Can we afford it?" and "Can we afford to overlook something else?" enter into the debate?  Driving from Trier down to Kaiseslauturn a couple days ago, I saw hundreds of the newest, lightest-weight wind turbine blades.  Regrettably, I didn’t see any of them in motion.

     

     

    That was probably because the wind that day was probably less than 20 kph (though it blew quite steadily at that lower rate.)  But it does point to the problem with relying on only one or two energy sources.  What if it is relatively windless for many days in these sites specifically chosen for their windiness?

     

    I also had the opportunity to see a number of solar arrays that extended over scores of acres.  These are some big solar arrays! Regrettably, we saw them only in the morning, when they looked like this as we drove through:

     

     

    Those of you who live or who have lived on the central plains of Germany know that the Lock Naesse Monster (“Naesse” is “fog” in German) know that it takes quite a few hours for the fog to burn off.  In winter, in those northern latitudes, the sun is only out for 8 or 10 hours total, so if five are foggy, this, too, yields only an intermittent energy source.

     

    I say this not to denigrate alternative energy, as some commenters more interested in social engineering than investing have intimated.  After all, I am buying an electric motorbike rather than a car for my faraway vacation home and I grow a good bit of my own food during season.  (But I have no illusions as to either: I am acutely aware that the motorbike runs on electricity generated by coal, making my “clean” statement someone else’s “dirty” problem.  As for the food, I do it because I like to garden; clearly it is more efficient to grow on 1000-times larger plots and transport via full truckload rather than growing “intermittently” or having 50 farmers take 50 trucks to a local farmers’ market…)

     

    The whole issue comes down to (1) intermittency versus certainty and (2) what works locally.  Mountainous terrain blessed with lots of snow and water like that found in Norway are naturals for hydroelectric.  Chad is not.  Chad is a great place to install solar farms; Norway is not.

     

    So what does the US have “locally?”  It is blessed with an abundance of coal – the most of any nation in the world; deserts and basins where solar will work once it can be focused, stored and distributed; oil, now mostly offshore; natural gas in new-found abundance; wind in some areas – again, once it can be focused, stored and distributed;  nuclear, although we should be the world leader and instead are frozen in fear of bogeymen that are really straw men; geothermal, albeit concentrated in only a few areas; and an entrepreneurial spirit that will find, develop and provide other forms of energy.

     

    What sources provide 70% of our electricity generation?  Oil, natural gas, and coal.  What provides another 20%?  Nuclear.  That’s why I buy oil, gas, coal and uranium companies and might only occasionally dabble in alternative energy investments.  Seeking Alpha is an investment site, not a place to spread agitprop about one’s favorite social engineering scheme!  For investment power, I suggest deeper research into the best companies that provide 90% of this nation’s electrical energy rather than hoping to get lucky with an investment in the other 10%.

     

    Can Germany be a model for the US?  Only in the most limited way.  The most efficient power generation is local.  Germany does not have the US’s abundance of fuel riches.  The less one has locally, the more one must depend on the kindness of strangers.  If we include those resources that are excess to Canadian citizens and which they are more than willing to sell to the US, we can depend upon ourselves and our friends, not strangers.  I suggest for your further due diligence the same boring, predictable and profitable companies I’ve discussed before: Exxon Mobil (NYSE:XOM), Royal Dutch Shell (NYSE:RDS.B), Chevron (NYSE:CVX), Statoil (NYSE:STO) and, at these prices, even BP.  I also like two service firms you might want to take a look at: Weatherford (NYSE:WFT) and SeaDrill (NYSE:SDRL).

     

    Author's Disclosure: We and those clients for whom it is appropriate own or are purchasing XOM, CVX, RDS.B, BP and STO -- as well as WFT and SDRL.

     

    The Fine Print: As Registered Investment Advisors, we see it as our responsibility to advise the following: we do not know your personal financial situation, so the information contained in this communiqué represents the opinions of the staff of Stanford Wealth Management, and should not be construed as personalized investment advice.

     

    Past performance is no guarantee of future results, rather an obvious statement but clearly too often unheeded judging by the number of investors who buy the current #1 mutual fund only to watch it plummet next month!

     

    We encourage you to do your own research on individual issues we recommend for your analysis to see if they might be of value in your own investing. We take our responsibility to proffer intelligent commentary seriously, but it should not be assumed that investing in any securities we are investing in will always be profitable. We do our best to get it right, and we “eat our own cooking,” but we could be wrong, hence our full disclosure as to whether we own or are buying the investments we write about.


    Stocks: XOM, RDS.B, CVX, STO, BP, WFT, SDRL
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