[Graeme]

The Best Peak Oil Investments, Part II: Hydrogen and Vehicle Electrification

There are many proposed solutions to the liquid fuels scarcity caused by stagnating (and eventually falling) oil supplies combined with growing demand in emerging economies. Some will be good investments, others won't. Here is where I'm putting my money, and why. This second part looks at hydrogen and electrification strategies for replacing oil.

In Part I of this series, I listed four potential substitutes that have been proposed to replace oil as limited supply and growth in developing markets draw oil away from traditional users. I've since added a fifth to my list of potential substitutes:

1.Biofuels and Biochemicals
2.Vehicle Electrification
3.Hydrogen
4.Natural Gas
5.Coal and Gas to Liquids

Part I looked deeper into the potential for biofuels to displace oil, and made some recommendations as to which stock might benefit most from this trend. In this article I'll look at vehicle electrification (including traditional hybrid electric vehicles (HEVs) such as the Prius, plug-in hybrid electric vehicles (PHEVs) and pure electric vehicles (EVs)), and hydrogen vehicles, since they have many similarities.

altenergystocks

[Graeme]

Peak Oil Investments I'm Putting My Money On: Part III, Natural Gas Vehicles

The case for natural gas vehicles is only convincing if you don't compare them to the alternatives, or you think you might be able to make money by selling natural gas for fuel. In most cases, EVs provide a better solution, despite the problems I outlined in Part II. The only two stocks I'm aware of in this industry are Westport Innovations (WPRT) , and Clean Energy Fuels (CLNE). Westport makes fuel injection systems and engines for gaseous fuels, including natural gas as well as hydrogen and LPG. Clean Energy Fuels is majority owned by T. Boone himself, and builds natural gas fueling infrastructure and liquefied natural gas [LNG] shipping terminals. I'm not sure what the LNG terminals have to do with energy independence... T. Boone does not go into that in his eponymous Plan.

If I had to buy one of these, it would be Westport, because at least they have a diversified business that is not totally reliant on natural gas. Fortunately, I don't have to buy either... so I won't. Clean Energy might be worth a short, the next time it spikes, though. Here's Eamon's take on CLNE.

seekingalpha

[Graeme]

The Best Peak Oil Investments, Part V: Algae

There are many proposed solutions to the liquid fuels scarcity caused be stagnating (and eventually falling) oil supplies combined with growing demand in emerging economies. Some will be good investments, others won't. Here is where I'm putting my money, and why. This fifth part takes a look at the growing consensus that our biofuels should come from non-food crops grown on land that is not otherwise productive, and the one crop that shows promise of delivering the high yields needed to satisfy our enormous thirst for fuel is algae.

Many observers herald biofuel from algae as a way to thread this needle. Algae grown in open ponds is likely to produce 5,000-10,000 gallons of oil per acre per year, while companies using bioreactors have made claims approaching 10 million gallons per acre. The higher-end claims for algae in bioreactors are either pure fantasy, or would require vertical farms with artificial light, but a 100,000 gallons per acre per year (1/100th of the high-end claims) is generally considered achievable. For comparison, Zeachem is aiming for 2,000 gallons of ethanol per acre of sugarcane per year, one of the most productive conventional biofuel crops. Corn produces less than 500 gallons of ethanol per acre per year.

The potential of a hundred times improvement in fuel yields over conventional crops keeps people excited about algae. On paper, such yeilds would allow algae to replace oil in our economy.

We still don't know what sort of bioreactors will end up being economic, which types of algae will work best, and what the best ways to extract the oil from the algae will be. This is an extremely immature technology, and as such, it is unlikely to be a profitable sector for investors in public companies. With over 200 startups working on algae, only four of which are public (see below), the most likely winners are private companies. Many of the winners have not even been incoprorated yet.

altenergystocks

[AAA]

According to many here peak took place somewhere between 2005 - 2008 and according to them we are living post-peak

So on of my best post-peak investments has been the S&P 500.

I practice dollar cost averaging in the markets so I am fortunate to have 75+% in the S&P 500.

[Golgo13]

Why gamble on uncertain alternatives to oil when you can make a boatload of money betting on the sure thing?

[Graeme]

The Best Peak Oil Investments, Part VII: Peak Substitutes?

There are two types of solutions to the liquid fuels scarcity caused by stagnating (and eventually falling) oil supplies combined with growing demand in emerging economies. The most obvious is to find a substitute to replace oil. Supply constraints limit the full replacement of oil by most potential substitutes. Understanding those constraints leads us to the investment opportunities that arise from these substitutes.

If we want to understand the amount of natural gas available for natural gas vehicles, we need only consider the supply of fossil natural gas. Biomethane is only a rounding error in the overall calculation. Hence, while biomethane may make some investors rich by growing rapidly from a small base, it will have a negligible difference to the success of natural gas vehicles. If you believe biomethane will take off, the best way to invest based on that belief would be to invest in dairy farms, not in natural gas vehicles.

altenergystocks

[Graeme]

The Best Peak Oil Investments, Part IX: The Methadone Economy

The first eight parts of this series looked into alternative fuels. I concluded that no alternative fuel listed could replace oil as we use it today fast enough to replace dwindling oil supplies. Conventional biofuels cannot be produced in enough quantity, and making hydrogen is an inefficient use of electricity or natural gas. Electric vehicles are too expensive or have too little range. There is not enough natural gas and there is too little fueling infrastructure to make natural gas vehicles practical on a large scale. Gas-to-liquids makes sense for stranded natural gas, but there are too many other high value uses for natural gas to make a large dent in declining oil supplies. Coal to liquids does too much environmental harm, and algae needs too much more technological development to achieve its promise in time.

The biggest problem with alternative fueled vehicles, however, is not the alternative fuels, the problem is the vehicles and how we use them.

This is the Methadone Economy. Alternative-fuel oil replacement therapy is necessary because oil supply will not keep pace with demand; we must replace oil or do without. But alternative fuels are not oil, and will require more effort devoted to energy production to produce the same effect. The Methadone economy will function, but it won't give us the highs we got from the cheap, concentrated, easily accessible energy of oil.

renewableenergyworld