Mainstream Investments in Renewables Signal an Inflection Point

David Fessler By David Fessler, Energy and Infrastructure Strategist, The Oxford Club

Alternative Energy

Like many Americans, I’m hopeful we can move beyond partisan politics in Washington. We have no shortage of important issues to deal with – healthcare reform, tax reform and, my favorite, infrastructure spending… just to name a few.

I touched on this here back in February.

One of the things I said in that piece – and it’s still true – is that Donald Trump likes physical stuff. That’s why most of his investments have been in casinos, hotels and golf courses.

They are all things Trump can point to and say, “Look what I built.”

Of course, now that he’s president, his son Eric runs the vast Trump Organization. The president gets quarterly updates on its performance.

Now Trump gets to think bigger when it comes to building stuff. Instead of hotels, he’s thinking about new airports, upgraded power grids and pipelines.

According to his “Priority List: Emergency & National Security Projects,” Trump wants Congress to spend $137.5 billion on infrastructure projects. He wants private investors to kick in the same amount.

As it turns out, private investors do want to invest in energy infrastructure. But unlike Trump, they don’t want to invest the money in new coal-fired power plants…

Go Where the Money Goes

Five or six years ago, fund managers couldn’t have cared less about investing in renewable energy. But all that has changed.

Today, renewables have become a cornerstone of energy infrastructure. Renewable energy is no longer a “niche” investment. It’s now mainstream.

Wealthy investors don’t dig coal – or nuclear for that matter. Even though the president is high on coal investment, these high-powered individuals and institutions want to spend on green energy projects.

BlackRock, the world’s biggest global investment manager, is just one example. It has a renewable infrastructure investment platform – mostly focused on wind and solar projects – that now manages more than $4 billion of its clients’ money.

Many companies are also committed to using electricity from renewable sources as well – and they’re doing it without federal money. General Motors (NYSE: GM), Apple (Nasdaq: AAPL) and Wal-Mart (NYSE: WMT) are among the big users of renewable energy.

It comes as no surprise then that in the last two years, U.S. wind and solar developers have built more than 40 gigawatts’ (GW) worth of power plants. These plants are running and connected to the grid. That brings our country’s total installed solar and wind capacity to 120 GW.

In other words, a third of all renewable generating capacity in the U.S. has been added in only the past two years.

It’s clear that the deployment of (and investments in) renewables has hit escape velocity. America’s renewable generating infrastructure is only going to increase over the next several years.

And while utilities are involved in some deals, they aren’t the biggest source of incoming money. Corporations are investing directly.

Bank of America (NYSE: BAC) has a renewables investment goal of $125 billion by 2025. Other investment firms are developing strategies involving renewables to attract traders.

For example, in the last two years, CohnReznick Capital has executed more than 90 merger and acquisition agreements for a combined value of $12 billion. Many of those deals were with corporations that want to invest in renewables.

So much major investment activity in renewables means we’ve passed an inflection point. But rest assured: Demand for renewable infrastructure is only going to increase from here.

If you’re smart, you’ll have more than just a little exposure to renewables in your energy investment portfolio.

Good Investing,

Dave

P.S. Subscribers to my paid newsletter, Advanced Energy Strategist, have plenty of exposure to renewables. In fact, they’ve already seen triple-digit gains on two of my recommendations in the past year alone.

There’s no doubt that there are more gains like these to come…

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