US Stimulus Package

2nd Jan '21 by Villa50DesertPalm

18 comments 647 reads

Just read an article covering the US stimulus package and the green benefits included. I already have a decent holding in INRG which I am tempted to increase along with 35 Tesla shares but would like to increase exposure to US ETF clean energy companies or individual stocks. Ideas much appreciated. Roger

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Villa50DesertPalm

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18 comments

William K

2nd Jan '21

TAN and ICLN are two US ETFs available through IG. Jinkosolar JNKS is worth a look. NIO is also worth a look if you want an alternative to TSLA. Good luck. I think renewable energy has a great future. (ICLN is essentially the US version of INRG). TAN is overbought at present but could dip to $95 at which point I intend to buy.

mojomogoz

2nd Jan '21

If green revolution and ESG is real and will have policy and regulatory push behind it so as moves from the realms of what might be to what can be then nuclear energy to replace hydrocarbon more fully over time (think France) to provide a stable base to 'renewables' of various sorts is the most under appreciated and valued part of this universe (partly as its not really recognised as part of it). Reliance on renewables cannot be too ambitious as storage and ultra long distance transmission not up to the job yet...and big policy $s can't chase maybes.

Energy political 'progressives' are undergoing a process of conversion to nuclear as a result as the the alternative is unpalatable and unelectable -> to sell drastically reduced energy consumption to Western electorates...at a time when China pays lip service to green notions but is intent on ensuring they maximise energy supply (through coal, oil as well as massive nuke build) to their economy...excess cheap energy is growth after all). Re-invigoration of nuke is a geopolitical issue as well as environmental.

The obvious plays are the uranium miners. Cameco and Katatomprom are the big guys and then there's a bunch of smaller players of various degrees of speculativeness. Some of these small players will rise hugely in price as uranium pricing rises to meet current severe supply imbalances. There are also a few industrials that are integral to US and Western rejuvenation of nuke industry

William K

3rd Jan '21

$PBW is about 8% below its 52 week high and looks OK at its current price of $103.

William K

4th Jan '21

This is a list of the top 20 ETFs of 2020. Nine of them are clean energy funds with an annual gain ranging from TAN at 179% down to SMOG at 93%. Most are trading above their 5 day moving average, and have done so since around October 2019 (apart from the February-April dip when everything fell in price).

GrahamF

4th Jan '21

China may well continue to expand its nuclear power base at a relatively high rate but they are expanding renewable energy at a high rate too. I don’t think you can dismiss it as lip service. The cost of renewable energy is tumbling and as the UK has found nuclear is looking expensive by comparison. Added to that battery storage tech is advancing to overcome the variable nature of wind and solar production.

I don’t see the political will to invest in new nuclear in the West (Fukushima legacy, high cost, long delays, technical problems).

The uranium/new nuclear play has been talked about for many years and hasn’t come to fruition so far. It may still do. But the progress in renewable tech and costs is so fast it is looking much less likely to do so in my view.

dmjram

4th Jan '21

Nucelar is only expensive compared to renewables for low carbon output if you ignore the variability/intermittency of the latter that necessitates huge amounts of backup plant with its own costs and carbon footprint. See Germany, still building filthy lignite stations to cover its solar/wind farms and stabilise its grid from the frequency issues introduced by large renewable penetration after shutting its nuclear plants early.

Storage has its own cost (if indeed it is viable at a grid scale for the durations required) and necessitates large amounts of generation redundancy i.e. you get a double cost of whammy to coin a phrase - lots of surplus plant to generate a surplus along with lots of storage.

And of course there is the cost of grid upgrades to move all that variable power around. Again, see Germany - where the wind blows often isn't where you want the power to be generate to optimise the grid.

Much of the relevant costs for renewables are hidden (just like smart meters, c£12bn being added to bills) and not accounted for when the headline strike price for generation for a site is quoted, which isn't a guarantee to build to that site as it is for the likes of Hinkley.

Hence government policy is for new nuclear as well, the issue to be resolved is how to fund the front ended capital costs for a plant that will generate for 50+ years at very low marginal cost.

Finally, the green plans in the US is highly contingent on the Senate passing the bills - which will turn on the 2 elections in Georgia.

dmjram

4th Jan '21

"at a time when China pays lip service to green notions but is intent on ensuring they maximise energy supply (through coal, oil as well as massive nuke build)"

Exactly, and they fund coal power plants across the world to tie in with their political policy as well.
Building intermittent wind plants for the donor countries would be nothing like as popular given the costs/complications of backup supply inherent with renewables.

GrahamF

4th Jan '21

Those are fair points. The cost comparison is quite complex. Do we add in the future decommissioning costs for nuclear and if we do how can we estimate those with any accuracy? Will the backup costs for renewables be so high if the cost of battery storage reduces substantially?

However, my point is not trying to prove which is more expensive. It is more around the case that the costs of renewables are falling and are expected to fall further and the ramp up of nuclear is not fast.

I heard the argument that uranium was the future around 15 years’ ago. But it hasn’t turned out that way so far. Over the period 1999 to 2019 it’s been reported that 99 new nuclear reactors came on stream and 99 were retired.

It does now look like demand is going to grow (maybe somewhere around 20 - 30% but that’s over 10 years) but just the time scales for new nuclear to come on stream make it a gradual build up rather than a rapid one. So, I do think the overall outlook for uranium is positive, just that it’s potentially a long process to make significant returns (even assuming that renewable tech makes no further inroads into the case for nuclear).

dmjram

4th Jan '21

The strike price for new nuclear includes the costs for fuel/plant decommissioning, based on what we know of the costs from existing decommissioning.

If battery storage costs fall then it will benefit renewables but nothing will change the huge redundancy costs involved - you need to generate a large surplus from your wind farms to fill the batteries while still meeting current demand. Tech advances can't change the laws of physics - when the wind doesn't blow, you don't generate power. You don't need to build duplicate nuclear plants to store electricity in batteries.

New nuclear has a long lag from design approval and then to first build. Once you have a pipeline of plants, they come on stream regularly and rapidly. See France in 70's/80's.

Politically it is difficult but from an energy reliability and security standpoint, nuclear will always have the edge on intermittent renewables. Hence it will be the politics that determine the expansion and overall returns in the respective sectors I would suggest.

mojomogoz

4th Jan '21

Hello dmjram and GrahamF

I share more of a view with dmjram. I'd prefer lots of renewables but I believe the idealism falls short in reality. Energy is growth and development. Energy is personal leisure (before we mastered energy its took one person and their labours to produce enough for two in traditional agrarian socities). This meant that leisure and personal development (eg education, art, sport, etc) were luxuries affordable to tiny minority. I think the interesting thing about a ‘green new deal’ now being put into action is that if its truly a concerted action it will reveal the true extent of energy to be replaced and the need for reliability, immediacy, portability and some degrees of energy density in terms of its production (oil is irreplaceable for this. The Extinction Rebellion -Greta radical glamour arm of environmentalism implicitly believes in a sort of return to a pre hydrocarbon ‘natural state’ to some degree. These guys will be elbowed aside by those more hard nosed about environmental stuff….and that will lead inexorably to nuclear as a significant base load24/7 365 provider.

Not that nuke is a panacea as GrahamF states. For one there is a reasonable shortage of sites globally that can accommodate the current mega nuke plant. Then always the understandable safety anxiety. Approx every 10 years there has been an accident and on that basis we are due one (that will likely harm my uranium view unless a very concerted pro-nuke stance has happened). But it is still the most practical and attainable high energy and high energy density production with 100% on time reliability…plus there is a significant degree of innovation taking place with Small Modular Reactors. These things reduce costs (as factory produced), increase sites that can handle nuke and probably improve safety significantly.
https://www.iaea.org/newscenter/news/nuclear-power-for-the-future-new-iaea-publication-highlights-status-of-smr-developmentRolls-royce Holdings (LON:RR.) are significant players https://www.rolls-royce.com/pr... my opinion, all of human technological and social development since 1700s can be attributed to excess energy in the system. I am an idealogical agnostic but my core economics perspective is most aligned to the Biophysical Economists (eg Charles Hall perhaps best known...though he himself comes from a 'systems ecologist' background...which is why he realised economics to be an energy system).

Our absolute abundance of energy since we found coal and then oil has been staggering. Early in our heavy industrial use of oil we could use one barrel of oil energy to produce 100 barrels. This is called the energy cost of energy. The abundance was superb. Today the picture is very different and we are down to approx 1 barrel to produce 10. ECOE is not as good for other energy sources with some of the renewables being particularly low. No one really knows how low we can go before economic progress reverses but it is a serious issue. Many renewables are at and all in ECOE that makes them questionable as anything other than marginal energy sources. This can improve with technology but there are serious barriers neverthelss. For example, Germany doesn’t have enough sun or wind throughout the year for these renewables to be a serious source, its also has a tough geography in that useable land is much less than the area of the country (most of south and central germany is quite inhospitable land and germany is really a bunch of conurbations around the outside). China is even more problematic from perspective of average geography and weather. It doesn’t mean its impossible but it makes it much harder and further from ideal. Beyond straight geopolitical competition with West this is another reason why China talks green but says it will max out on hydrocarbon until 2030! They are undoubtedly playing us…they know that energy is power and we are being super dumb about it (ask US military and they know!)

I acknowledge uranium to be a highly speculative area that has disappointed structurally since Fukushima for a variety of reasons (eg excess inventory onto market from Japanese inventory, late Noughties uranium boom that brought on supply just before Fukushima and entrance of Kazakhstan into market with large and fairly cheap resource that they were initially not price sensitive about).

Now you have commodity that is way too low to incentivise new supply. Both Cameco and Kazatomprom (biggest) had 'furloughed' mines due to price before covid and Cameco had been particularly active is buying from spot market to fulfil its long term contracts (contracted at prices above current spot...long term price is usually above and these old contracts particularly so). That has picked up with covid and mines have been closed due to virus. This has mopped up a lot of the remaining overhang of material that kept prices down.

The build in China is ferocious and is significant in other countries too.

Then France (75% of electricity from nuke) has decided to extend life of current plants.

Uranium is catching the EMG eye...and financial players may have an eye on this game (moved in the stocks were dramatic in December...could reverse obvs)...

https://www.zerohedge.com/mark...

Obvs the above is 'crazy' ZeroHedge but bubble TV (CNBC etc) had been picking up the uranium idea too. A lot of hedge fund money has been pushing around ESG stocks (partly through SPAC games) and uranium is a tiny area that can be pushed a lot...it would not take much to corner the physical uranium market. As price needs to rise to create new future capacity this is a no lose game for a concerted few with deep enough pockets at big hedge funds...I'm not saying it is happening...but knowing that world its clear it could happen (what do you think is going on with Bitcoin!). The things with uranium is that price rises and the utilities all come in with long term contracting demand...self fulfilling prophecy.

I’m out of time (longer than I planned!)…but happy to talk more re this and uranium.

As a sign off I’d say that if you really believe in a huge intense infrastructure plan to come then for the next 5 years producing hydrocarbon assets are boon. A rapid and significant transition will be very hydrocarbon intensive at a time when investment in new production there as been low….and this is likely to help the short run case for nuke!

DYOR though as uranium stocks are toxic volatility and very low quality assets at current uranium prices!

mojomogoz

5th Jan '21

Additional point:

If you believe 'green energy transition' and the race to zero carbon then for the foreseeable future carbon atoms are going to get very expensive (ie oil, gas and coal). A meaningful and rapid transition is super energy intensive and must be fuelled significantly by old energy.

I think this transition will take place...but the motivation is as much hard nosed geopolitics as environmental. Laggards lose status.

The UK is relatively fortunate as we are one of the few countries with the natural geography and climate to support very significant renewables based on what's foreseeable with current technology....our coastal geography and wind

Villa50DesertPalm

5th Jan '21

Amazing response, very detailed and so informative. Those who replied to my question took time and effort to help me expand our exposure to renewables. Many Thanks, Roger

mojomogoz

6th Jan '21

Connected to above discussions...I just stumbled across Saxo Bank's 10 outrageous (ie possible but not likely) predictions for 2021. Check this one out re Fusion energy:

https://www.home.saxo/content/...

William K

6th Jan '21

Fusion? Somehow reminds me of Neil Woodford's flirtation with Cold Fusion.

dmjram

6th Jan '21

Like grid scale storage for renewables, fusion is always a few years away but on a rolling basis....

mojomogoz

6th Jan '21

Hee hee...yes...certainly can't plan and pour money after it until its a tangible reality. Though best spend some on it as wind and sun ain't going to cut it and hydrocarbon is finite and despised.

That said, I believe we will get there, partly as we must to create the energy abundance we need. It may be a 100 plus years though...maybe an alien civilisation will donate it to us....

mojomogoz

6th Jan '21

That is thorough condemnation!

mojomogoz

7th Jan '21

Bit tangential to the main post but following comments re nuclear power....

Russia plans new generation of floating nuclear power plants

https://www.neimagazine.com/ne...

Not necessarily the innovation that floats peoples boats...

US Stimulus Package

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Villa50DesertPalm

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