Profit From The Solution To This Coming Energy Crisis

| May 9, 2024

A recent Wall Street Journal article discussed the challenges facing the U.S. electrical grid. The problems facing the energy infrastructure system provide opportunities for investors. It’s time to think outside the box concerning solutions for potential power shortages.

U.S. power consumption has been relatively flat for the last 20 years. Conservation measures and efficiencies have offset energy consumption from the growth in population and the use of electronic devices. That status quo is about to change. Two major factors will dramatically increase electrical power needs in the coming years.

Underway is a massive reshoring of industrial manufacturing capacity. Manufacturers realize they must produce products in their primary market, the U.S. The CHIPS and Science Act of 2022 will provide billions of dollars in financial assistance to chip manufacturers developing new production facilities in the U.S.

The explosion in the development and use of artificial intelligence (AI) means that AI providers must build massive data centers to house the AI computing chips and servers.

That creates a huge opportunity for investors hungry for growth and income…

Here are some data points from the WSJ article:

  • “Georgia Power recently increased 17-fold its winter power demand forecast by 2031, citing growth in new industries such as EV and battery factories.”
  • “Chip factories and data centers can consume 100 times more power than a typical industrial business.”
  •  “Electricity demand to power data centers is projected to increase by 13% to 15% compounded annually through 2030. Yet a shortage of power is already delaying new data centers by two to six years.”

In recent years, public utilities have focused on shutting down fossil fuel power plants and replacing them with renewable energy sources. The utilities have not worked to grow the amounts of power they produce. Incentives for renewable energy make it financially infeasible to restart coal and other fossil fuel power plants.

Companies with large industrial operations or data centers are taking matters concerning their power needs into their own hands.

For investors, this trend means opportunities. First, natural gas is a widely available and cheap fuel for power production. Natural gas producers such as Antero Resources Corp. (AR) and EQT Corp. (EQT) should see increased demand and higher prices for the gas they produce.

Nuclear small modular reactors (SMRs) are a possible solution. However, these SMRs are still in the development phase, with no reactors currently in operation. Stocks of SMR developers should be viewed as highly speculative.

This post originally appeared at Investors Alley.

Category: Stocks

About the Author ()

Tim Plaehn is the lead investment research analyst for income and dividend investing at Investors Alley. He is the editor for The Dividend Hunter, an investment advisory delivering income investments with double digit growth in share price and dividend payments. Tim’s also editor of Weekly Income Accelerator, a covered call trading service, and Automatic Income Machine, a dividend growth service focused on growing your nest egg.

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