“People just don’t understand how much electric demand there will be.”
That’s what Elon Musk told his audience at the PG&E (Pacific Gas and Electric Company) Innovation Summit in July.
PG&E provides natural gas and electricity to 5.2 million households in the northern two-thirds of California.
That makes it one of the largest natural gas and electric utilities in the U.S.
And it expects demand for electricity from its customers to grow by 70% over the next two decades.
But Musk is telling everyone to think bigger. As he put it…
Whatever your demand predictions are for electricity, I suspect they are too low… I recommend anticipating much higher demand.
To reach a sustainable energy future where everything is electric, we need to triple the amount of electricity we produce, according to Musk. And we need to start doing it soon.
The world’s richest man isn’t the only one sounding the alarm.
Today, I’ll show you why electricity demand will soar as we transition to cleaner energy. This is one of the biggest trends on my radar right now.
I’ll also show you one way to profit from this trend by collecting reliable, growing income.
The Days of Cheap Power Are Over
Norway used to have more electricity than it could use.
The country’s mountains and lakes are perfect for hydropower, which makes up more than 90% of the electricity it produces.
The abundant cheap power allowed Norway to become one of Europe’s largest energy exporters.
It also allowed the Scandinavian country to lead the way in electrification.
The Norwegian Electric Vehicle Association says that 20% of the vehicles in the country are electric. And 80% of new cars being sold are electric.
The government is also encouraging industrial companies to switch from natural gas to electricity.
But the rising demand for electricity means Norway’s days of cheap power are coming to an end.
Last year, the country’s grid operator, Statnett, warned that Norway could face a shortage of power as soon as 2027 and be forced to import electricity.
And Norway’s looming power problem is exactly what Musk is warning our energy future looks like if we don’t start building more energy infrastructure right now.
Golden Opportunity
The Energy Information Administration (EIA) is a U.S. government agency that provides energy statistics, forecasts, and analyses.
It says about half of the energy we use in our homes and businesses comes from electricity.
The other half comes from oil and gas. These fuel sources are used for cooking, drying clothes, water heaters, and heating homes during winter.
But homes and businesses make up only about 30% of all the energy our economy uses.
The industrial and transportation sectors each make up about 35% of our energy needs. Only 22% of the industrial sector runs on electricity. And the transportation sector still uses oil and gas for 95% of its energy.
This all adds up to a golden opportunity for utility companies to build the infrastructure we need for the electric future.
How to Play It
Most utility company earnings are regulated based on the infrastructure assets they own.
So building out the grid to support higher electricity demand will boost their earnings for years to come.
And there’s plenty of government funding to help them do it.
The Inflation Reduction Act authorized the Department of Energy to make up to $250 billion in low-cost loans.
This cheap money will help utilities finance the major projects needed to modernize the power grid.
One utility company I like is Eversource Energy (ES). It serves customers in Connecticut, Massachusetts, and New Hampshire.
Eversource recently announced it was leaving the American Gas Association to “focus on decarbonization.” It sees where the future of energy is going and is getting a head start.
Eversource currently yields 4%. It trades at roughly 15x earnings. That’s the cheapest it’s been in over a decade.
But that’s not even my favorite way to play this trend right now…
It’s clear the government is pouring trillions of dollars into the shift toward green energy. And that won’t slow down. An estimated $44 trillion of investments is expected by the end of 2030 to meet the increasing demand.
Brookfield Asset Management, the world’s largest infrastructure investment manager, calls this the second largest investment opportunity in human history.
And the biggest winners will be the companies that help bridge the gap and help serve America’s growing energy needs – both individual and industrial.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily
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Source: Wide Moat Research
