GREEN ENERGY NOT DOWN FOR THE COUNT
The price of crude oil is down 75% from 10 years ago. The futures price even went below zero for a short period last month. You might assume that very cheap oil would have spelt doom for Green Energy, the energy produced by wind and solar. You would be wrong.
Both utility-scale wind and solar projects are doing just fine thank you. Two big reasons account for this. First, the cost to build a project has plummeted. The average large-scale photovoltaic project costs just $0.80 per installed watt today versus $3.53 a watt 10 years ago. Second, utility-sponsored projects issue lots of bonds which are in strong demand by institutional investors hungry for long-term yield. And the electric output is being snapped up by large corporations looking for low fixed cost power. Google for instance is powering its new $600 million Dallas data center in part from Texas solar projects.
Its interesting that Texas, known for Big Oil, is now looking more and more like Big Green. The state ranks first in the U.S. in wind power, and Texas will build a quarter of the record new utility-scale solar projects planned in the U.S. this year. And the ultimate irony is this solar power is going up right in the middle of oil country, the Permian Basin.
BUY LOW, SELL HIGH?
Individual investors get a bad rap. They are considered by some to be ill-informed and prone to money losing emotional impulses. But I find that many individuals are excellent long-term investors, not trading their 401(k)s excessively and holding individual investments through thick and thin. It is often institutional investors worried about underperforming their benchmark who trade excessively. Call it ‘career risk’ behavior.
But many individuals also fall in the camp of “let’s try to make a quick buck.” When Charles Schwab and TD Ameritrade reduced commission rates to zero last year the move attracted a lot of investors, many of whom were first time buyers. As the old poker saying goes, if you can’t determine who’s the sucker in the first five minutes of sitting down, you are the sucker. Short-term trading don’t work.