Opportunities in Energy Sector

I believe that there are various opportunities available in the ‘Energy’ sector as Global adoption of
renewable energy gains momentum.

The change to renewable energy and low-carbon greenhouse gas emissions is speeding up around the
world. Renewable energy is increasingly being recognised as a way to help mitigate climate change by
nations, governments, businesses, and other organisations, as well as by individuals. Many people agree
that extreme global warming must be limited in order to prevent long-term environmental harm.

To keep global warming under control, the world must drastically reduce new carbon emissions, which
are mainly the product of burning crude oil and coal, to a "neutral" level by about 2050. Carbon
neutrality is the principle that for every unit of CO2 emitted into the atmosphere, emissions elsewhere
should be reduced by the same amount. The consequences of taking this direction are enormous for the
energy industry, which accounts for roughly two-thirds of global CO2 emissions. Renewables (primarily
solar and wind) must rise to around 50% of the world's primary energy supply by 2050, up from less
than 10% today, to achieve carbon neutrality. As a result, coal and oil consumption will plummet, while
natural gas consumption will rise, although natural gas should prove relatively resilient.

A group of energy producers recently unveiled multiyear strategic plans to accelerate the production of
renewable energy and drastically reduce carbon emissions. I predict a substantial drop in demand for
fossil fuels as more businesses follow suit. Renewables have a strong chance of displacing coal and oil,
thanks to government policies and technical advancements that have driven down the cost of
renewable energy dramatically over the last decade. Solar and wind energy are now competitive with
conventional power sources in many ways. Renewable energy costs should continue to fall, while fossil
fuel costs will rise as more countries implement and increase carbon taxes.

To be clear, the energy sector's shift to cleaner, cheaper renewable energy will take decades, but there
is renewed enthusiasm across the board. Europe has long been at the forefront of the carbon-reduction
movement. China is a pioneer in the production of renewable energy and the introduction of electric
vehicles (EVs). Other major economies, such as India and the United States, are rapidly expanding
renewable energy resources and taking steps to reduce fossil fuel consumption, such as by subsidising
electric vehicles.

I'm concentrating on companies that will benefit from the transition to renewable energy. I'm investing
in conventional fossil fuel companies that trade at very low free-cash-flow multiples, return substantial
capital to shareholders, have a strategy to stay relevant as the transition unfolds, and have natural
gas/liquid natural gas exposure, which I believe will remain relevant for a long time.

Key takeaways:

 To help avoid extreme global warming, many people, organisations, and policymakers agree the
energy industry needs to turn toward renewable energies.
 Renewable energy costs have dropped dramatically over the last decade, rendering solar and
wind power competitive with conventional power sources in many instances.
 Renewable energy, backed by government policies and technological advancements, has the
potential to displace coal and oil in the coming decades, in my opinion.