The Global Energy Race

Written By Nick Hodge

Posted March 10, 2010

There’s an energy war going on… and it’s been raging for decades.

The Middle East, North Africa, Ex-Soviet States… all have witnessed turmoil because of their massive energy reserves.

And in each of those regions — amid the turmoil — fortunes have been made.

From the oilfields of Iraq to the gas fields in the former U.S.S.R., billions have changed hands as nations jostled for energy supplies to fuel growing economies.

Now though, the global picture is changing…

Developing countries are entering the race for energy and the destination of the finish line is constantly changing.

The Global Energy Race

For the past three decades, only a handful of developed nations were competing for large shares of fossil energy reserves.

The United States, Europe, and Japan, for the most part, had no trouble dominating other countries in the quest to secure oil and gas to fuel their world-leading GDPs.

But things have started to change in the past few years…

Brazil, Russia, India and China — the so-called BRIC nations — have emerged as great forces in the global economy. And as their economies grew, so did their thirst for cheap energy.

You’ve probably seen some of the headlines that have resulted.

China’s been cozying up to nations that have what can still be considered hefty oil reserves. India’s boosting its nuclear capabilities. Brazil has leveraged its sugar crop to get more than 50% of its liquid fuel from ethanol.

Indeed, these growing nations have been doing all they can to secure their energy future. And if there’s one thing they’re all realizing, it’s that future energy needs to be generated domestically — not imported from other nations.

This has led to new ambitions in the world’s developing economies. And if we don’t take note, we could quickly see ourselves falling behind not only in the pursuit for energy, but in the pursuit for global status.

Keeping Energy Dollars

Take China, for example: This is a country that has taken the energy market by complete surprise.

After failing to develop robust automotive and computer markets, China was viewed as a technology laggard. Great at production, yes; but lagging with regard to capacity for innovation.

But their thirst for energy changed all that…

China has been very serious about planning its energy future. And they’re dead set on making sure the energy comes from its own soil.

You see, not paying for imported energy keeps those billions of dollars in the country. In fact, it boosts the economy because new energy sources are being developed domestically, spurring spending and creating jobs.

It’s a lesson the West is slowly learning — some of us slower than others. But it’s a very important lesson, because every dollar we spend on imported energy is a dollar out of our economy and in someone else’s.

China’s intent on not falling into that trap.

They’ve created what BusinessWeek calls a "Super Ministry": the National Energy Commission, which will create and enforce new energy policies.

Some of these measures may seem extreme. But not only are they necessary; they’re creating a lot of wealth.

One of China’s most recent laws, for example, requires that utilities buy all the power produced by renewable energy generators. Unlike the U.S., that means developers don’t have to worry about finding an end market for their power. If a Chinese company builds a wind or solar farm, there is a guaranteed market for their product.

According to China’s State Council, "Power enterprises refusing to buy power produced by renewable energy generators will be fined up to an amount double that of the economic loss of the renewable energy company."

What’s more, the country is on target to meets its recently announced requirement of getting 15% of its energy from renewables by 2020. The U.S. doesn’t even have such a target and would be hard-pressed to meet one of that caliber if it tried…

And the Chinese government has already pledged $217 billion over the next five years to ensure their country emerges as an economic and energy leader, with plans for a $650 billion investment over the next decade.

The U.S. pledged about $80 billion to cleantech in the recent stimulus, but only a fraction of it has been spent. Meanwhile, we gladly spend well over $500 billion annually on imported oil.

It’s not hard to see who will be keeping their energy dollars in the new millennium.

The Investment Angle

So what’s the investment angle? It couldn’t be any clearer.

Invest in companies with leading clean technologies doing business in countries with progressive energy policies.

It sounds easy enough, but you’d be surprised at the number of people that just don’t grasp the concept. But here’s the proof…

Exxon Mobil (NYSE: XOM), Chesapeake Energy (NYSE: CHK), and Peabody Energy (NYSE: BTU) are unequivocal leaders of the oil, natural gas, and coal industries, respectively.

Canadian Solar (NASDAQ: CSIQ) and China Wind Systems (NASDAQ: CWS) are leaders in their namesake industries in China.

Here’s how they stacked up against each other over the past year:

Cleantech vs. Fossil

That’s the difference between the new energy economy and the old; between the status quo and the profit potential of new solutions.

Yes, we’ll still need coal, gas, and oil for some time to come. And that’s why stocks like Peabody and Chesapeake nearly doubled over the past year.

But a time is coming when those energy sources will be supplanted. As that happens, well-positioned clean energy companies will continue to deliver 1,000% plus annual returns.

The countries that transition first will emerge as the most powerful.

The energy companies making it happen will be the most profitable.

And the investors that react the earliest will pocket the most money.

Call it like you see it,

Nick Hodge


P.S. China’s ambitious energy goals have allowed cleantech companies operating there to make early investors a fortune. And while we’ve been slow to respond, our neighbors to the north are moving much more swiftly and aggressively. They’ve created a government agency called the Energy ATF — similar to our ATF, FBI, and CIA — that has just one mission: to systematically eradicate all sources of coal and oil powered energy.

And a few companies — detailed in this report — will be paid billions to replace old generation sources with clean ones. The 1,000% gains seen in China will surely be repeated. This time, you can read about the companies before they make other investors rich…

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