What is the Future of Energy Investing?

What is the Future of Energy Investing? It was a big week of announcements in the energy sector, but none of them came from the oil or natural gas giants. Instead, the spotlight fell on renewables. In a single week, Facebook announced its plans to cut greenhouse gas emissions by 75% in 2020 and to power its worldwide operations solely with renewable energy by the end of that year.1 Only a day later, California’s state assembly passed sweeping legislation that would have the entire state obtain 100% of its power from carbon-free sources by 2045.2 These announcements may sound groundbreaking, but for some companies they’re old news – Google and Apple are already powered by 100% renewable energy.3 Another data point this week showed that sales of electric vehicles (EVs) soared 77% in the second quarter from a year ago, with China accounting for more than half of the quarterly tally. This trend is not new either, as sales of EVs have been fairly persistently on the rise.4 With these seemingly massive shifts towards renewables, investors may wonder if it’s an opportune time to make a parallel shift in portfolios – away from traditional energy plays and towards renewables. To which we’d respond: not necessarily. --------------------------------------------------------------- [Give Yourself Every Investing Advantage]( At Zacks Advantage, we believe knowledge is an investor’s greatest advantage. Our comprehensive Savvy Investors Guide provides investing insight that we think will help you make better investing choices. You’ll learn about: - The Impact of Fees on Investments - Actively Managed Investing vs ETF Investing - Determining the Value of an Advisor - The Primary Trait That Successful Investors Have in Common [Download your copy of "The Savvy Investor’s Guide.5"]( --------------------------------------------------------------- While these trends and pledges do reflect a corporate and localized shift towards renewable energy sources, the bottom line is that the macroeconomic trend shows that renewables share of total energy consumption is still relatively small compared to oil, natural gas, and even coal. The Energy Information Administration’s August 2018 “Monthly Energy Review” shows total consumption of energy by source. As you can see, though renewable energy has been on the rise, as a country we still consume more coal, natural gas, and petroleum. The road for renewables to overtake natural gas and petroleum is probably longer than most investor’s lifetimes, in our opinion: Primary Energy Consumption Source: Energy Information Administration6 That being said, these shifts and trends do matter, in our view. As corporations, state and local governments pledge to shift energy consumption patterns, the new demand should drive expansion of wind and solar power, for example, helping to keep those corporations in business and also perhaps contributing to the development of a more competitive landscape in the renewables space. Before California, Hawaii had already passed legislation (in 2015) calling for 100% carbon-free electricity by 2045. As it stands today, Massachusetts, New Jersey, New York, and Washington, D.C. are also considering such a mandate.7 As demand expands further and further, competition in the sector ramps up, and technological innovation leads to lower costs and higher margins in the space, the investment thesis for renewables will only grow stronger, in our view. That’s what makes the trend increasingly important to watch, in our view. Bottom Line for Investors Renewable purchasing deals have been at record levels so far in 2018,8 but the energy landscape continues to be dominated by petroleum, natural gas, and even coal. As you can see from the chart below detailing energy production in the U.S., it’s easy to envision a future where renewable energy production outpaces coal, but it’s much less easy to envision the time when renewables would surpass natural gas and crude oil (which have both surged in recent years). Primary Energy Production Source: Energy Information Administration9 Even still, it’s worthwhile to watch the shifting trends in the sector especially now, as corporations and state and local governments are setting the stage for what the future may hold. As more corporations and governments follow suit, the demand for renewables should continue to grow in kind, which we believe could make the investment thesis for the sector more attractive over time. We know that staying up-to-date on these changes in the energy sector as well as other sector updates can be time-consuming and challenging. That’s why at Zacks Advantage, our approach to investing involves the use of technology and research to make investing easier, more fun, and less expensive. That’s why at Zacks Investment Management we have innovated with new financial technologies and now offer an actively managed robo advisor that: - Automates the advising process - Invests exclusively with ETFs - Uses technology to recommend the appropriate mix of equities and bond ETFs to help achieve your investing goal and specific risk tolerance. - Lowers fees and expenses For further information, we recommend you read our report: The Savvy Investor’s Guide [Get your copy of The Savvy Investor’s Guide10]( © Zacks Investment Management | [Unsubscribe]( 1 Axios, Aug 15, 2018, 2 Los Angeles Times, Aug 28, 2018, 3 The Verge, April 4, 2018, 4 Axios, Aug 31, 2018, 5 Zacks Investment Management may amend or rescind the “Savvy Investor’s Guide” offer for any reason and at Zacks Investment Management’s 6 U.S. Energy information Administration, August 2018 Monthly Energy Review, 7 Axios, Aug 15, 2018, 8 Axios, 9 U.S. Energy information Administration, August 2018 Monthly Energy Review, 10 Zacks Investment Management may amend or rescind the “Savvy Investor’s Guide” offer for any reason and at Zacks Investment Management’s DISCLOSURE Past performance is no guarantee of future results. 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