CleanTech is Thriving Even as the Oil Price Slides: Frank Carnevale’s Green Investing

Frank Carnevale | Energy and CleanTech consultant | February 17, 2016: Many investors are looking at global market volatilities and likely thinking that CleanTech and renewable energy must also be volatile investments.

It is logical to assume that the low cost of natural gas and low price of oil in North America will hamper the opportunities for CleanTech and renewable energy projects, but you need to better understand the drivers behind the advancement of CleanTech and renewables before reaching any conclusions.

Here’s a simple reality: Most of American and Canadian energy assets are in need of renewal. Successive governments and their regulators for decades have ‘kicked the can down the road’ on infrastructure renewal, and the ‘pig in the python’ is quite large and is at the point of necessary renewal yesterday. Those replacement dollars are not sitting in reserves somewhere.

Yes, different States and Provinces are at different stages of spending on their renewal, but it is happening.

While electricity infrastructure (supply and distribution) is delivered in various models across North America, from merchant markets in New England to quite controlled supply markets like Ontario, the reality is that there has always been the hand of government in some form or another overarching the system to protect consumers in some form of pricing, whether it be distribution or supply.

The reality is that the renewal of energy infrastructure is way more costly than the initial build out from decades ago to 100 years ago, regardless of integrating renewables or not. Because of this, renewables’ business case is on the incremental expenditures beyond the conventional fossil fuels and not stand alone.

New expenditures on replacement generation and renewal of distribution grids is causing significant increases in costs to rate payers.

None of that has anything to do with the price of carbon.

The expenditures in supply and distribution would have caused earlier price increases over 10 years ago, but the Great Recession simply delayed the inevitable as energy load demand dropped, and the ‘can was kicked down the road’ again.

COP21 and its own pressures on the non-fossil fuel aspect of power generation going forward is adding and going to add even more costs on the supply side of the equation.

For anyone thinking that more Conservative or Republican regimes will delay that impact of the price of carbon on society should know that while pre-Great Recession, Fortune 1000 were waiting for government to drive the direction of carbon, post-Great Recession, the Fortune 1000 are doing it on their own without government direction.

The train has left the station on having the price of carbon impacting rate payers and consumers.

Imagine while all of this is occurring, clean technologies are now in the ‘sweet spot’ of having very good business cases to sell to rate payers and consumers, and as those rate payers rely less on the overall supply and distribution grids, the adverse impact is that the costs of those grids go up to offset the lower demand, and they further improve the business cases of clean technologies.

In our opinion, clean technologies will only get better, and it is disconnected from the volatility of the global markets.

For clean technologies, the challenge is to pick the right technology and integrator vs. competitors.

For power generators and electricity distribution companies, their biggest challenge is ensuring that they aren’t left with stranded assets because new technologies have undercut any perceived values of centralized delivery systems. But, that’s another story…