Sand Hill's Chief Investment Officer, Brenda Vingiello, CFA, joins Jenny Harrington on “Halftime Report” to go over their most recent portfolio moves. Brenda's commentary begins
The Fourth Transition
Published Date : April 27, 2018
The use of fire by primitive humans for warmth, cooking and protection 300,000 years ago enabled our species to ascend from the middle of the food chain to its top rung. Eventually, using wood as the primary source of energy gave way to coal in the 1800’s, and with it came the electrification of homes, streets and factories – greatly accelerating the progress of civilization. Coal rather quickly gave way to oil and natural gas in the 1900’s, ushering in the internal combustion engine and with it, the modern age of transportation. Today, we find ourselves on the cusp of the fourth great energy transition – and likely one of the most important developments in the history of humanity.
After decades of hype and false starts, global renewable energy, and specifically the combination of solar energy paired with lithium-ion battery storage, is rapidly approaching an economic tipping point. That reality has been driven to date by the deliberate efforts of governments around the world to address pollution and climate change concerns, which in turn has led to improved silicon technologies and better manufacturing economies of scale.
Today, approximately half of all new power generation capacity worldwide is renewable in nature. At the current rate of adoption, nearly two-thirds of the world’s population will reach the unsubsidized point known as “grid parity” by the middle of the next decade, and it is now reasonable to project that renewable energy could power almost all of the Earth’s middle longitudes by the middle of this century. Against this backdrop, it is no coincidence that Saudi Aramco, Saudi Arabia’s state-owned oil company, is being partially sold off to the public later this year.
Of course, the sun doesn’t shine at night and the winds don’t always blow, so broad adoption of these technologies will require the ability to store energy overnight, or even seasonally in less ideal locations. Long an Achilles’ heel, battery storage limitations are now being solved thanks in large part to the boom in electric cars. Currently, 14 new battery factories are under construction worldwide, including Tesla’s “Gigafactory” in Nevada. With their completion, these investments will help drive solar energy to be cheaper than electricity from any other source within the next decade.
The long-term implications are transformational. Beyond the obvious environmental benefits, low-cost, decentralized power will benefit the richest cities and the poorest, most remote villages. Off-grid homes, hospitals and schools will have electricity; farms in arid parts of the world will have irrigation; and worldwide connectivity will be possible. Investment-wise, some electric utility companies will surely suffer from this transition; and yet, de-risking portfolios of fossil fuels will remain premature for some time as oil, gas and coal still account for 90% of the world’s energy and will continue to play a major role in energy production for most of this century. Eventually though, investing in renewables will become more viable as grid parity is achieved. And importantly, since the sun and wind are available to every country on the planet, geopolitics could finally pivot away from the unstable grip of the Middle East and Russia by mid-century.
That might seem like too long of a wait, but the economic crossover point is coming much sooner; and when it does, it will mark a significant new era of nearly unlimited, clean, low-cost energy. The abundance that follows could be the biggest boost to civilization since the Neanderthals lit that first fire. And that is worth getting excited about.
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All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
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