Few investment venues can rival the ever-evolving energy sector’s history, scale and prospects for abundant innovation, promise, profit … or boondoggle. In energy-land, swank investment carriages turn into pumpkins overnight, while seeming has-beens, such as U.S. oil production, roar back to steamroller Peak Oil memes nearly mid-sentence.

Brave must be the investor who seeks a fortune in the energy sector, where financial acme and abyss readily hold hands. Even braver are those who plunk down money for new technologies. Yet, to stand still may not be a sustainable investment option either. As new technologies become market proven, old-line businesses and their investors will join the gas lamp and phone booth manufacturers in the annals of obsolescence.

Every year the energy sector sees advances in formerly fringe sustainable industries, including wind and solar power. Hydrogen-powered vehicles are touted by Toyota Motor Corp., which already has its Mirai fuel-cell sedan in production. Increasing fleets of huge seafaring tankers are carrying liquid natural gas, often a substitute for oil. Improvements in the manufacturing processes of biofuels are lowering costs.

To invest in energy going forward, one must at least be aware of potentially disruptive new energy technologies, even if choosing to stay with steady standbys or on the sidelines.

Until recently, the sexy topics in energy were shale oil and gas, wind, and solar. But rather suddenly, the world looks ever ready for energy storage.

BATTERIES

Hardly a week passes without a press release from academia or industry on a potentially game-changing improvement in batteries. In late 2017, Tesla boldly announced it would produce a supercar roadster with a range of 600 miles by 2020. That announcement was soon followed by this headline at the CNET website Roadshow: “Honda hops on solid-
state battery bandwagon.”

Even as Tesla’s lithium-ion batteries prove their worth, a potentially better replacement, known as solid-state batteries, are becoming widely investigated by auto giants and others. A solid-state battery uses a material called “doped glass” as the electrolyte or conductor, rather than a gel or liquid. Toyota expects to commercialize solid-state batteries by the early 2020s.

As observers of the auto industry know, new technologies are typically introduced at the high end and then receive broader acceptance as cost of production falls. One might further reason that batteries are being improved every year, meaning Tesla’s 600-mile range is not a limit but a milestone.

Several nations, such as Great Britain, Norway and India, are setting dates after which sales of new vehicles with internal combustion engines will be outlawed. China, notably not an oil producer, is said also to be eyeing a future without internal combustion engines. It is reasonable to ask if one can see the end of the road for this technology.

Perhaps not surprisingly, lithium — the element so vital to modern-era batteries — has been touted as the “new oil” by some on Wall Street, although as of yet there is no lithium futures market.

Yet, betting on any particular company in any industry, let alone energy, is always a high risk-to-reward play. Enron Corp. was once a darling of energy industry analysts, while Tesla was once a curiosity. Carefully managed and august enterprises such as BP can be savaged by a one-off disaster, as evidenced by the epic 2010 Macondo oil spill along the Gulf Coast. The huge oil company eviscerated its investor-friendly dividend thereafter and has not yet recovered to its pre-spill value.

Happily, exchange-traded funds allow the investor to play an idea but diversify risk among several or many public companies. For the lithium crowd, there is the Global X Lithium & Battery Tech ETF. Since its nadir in early 2016 (think low oil prices and before the widening acceptance of Tesla and other battery-powered cars), Global X Lithium & Battery Tech ETF’s share price has about doubled in value. The ETF’s largest holdings include lithium-centric chemical concerns Albemarle Corp. and the FMC Corp., and the fund’s third-largest exposure is to Sociedad Quimica y Minera de Chile, the world’s largest lithium producer. The Global X Lithium & Battery Tech ETF is a ready investment vehicle to play various stages of a future lithium-based transportation industry. Naturally, the ETF also invests in Tesla.

THE BIGGEST BATTERY EVER MADE

Speaking of Tesla, in late November CEO Elon Musk delivered on time and on budget a utility-scale, 100-megawatt, back-up lithium battery to the state of South Australia, at a reported price tag of $50 million. The behemoth of batteries can deliver enough juice to power 30,000 homes when needed. The battery extends the daily lifecycle of wind and solar energy, by storing extra energy production that is not used, and then feeding the power back into the grid when needed.

Tesla’s outsized battery made headlines, but the entire field of batteries as grid-
attached energy storage is growing rapidly, as the cost of batteries falls and utilities explore the idea of more batteries rather than power plants. Unlike Tesla’s huge battery, more common are batteries installed in commercial buildings or warehouses that operate on the same principle of charging at night when local power plants are underutilized, and then releasing electricity during peak demand hours, typically in the afternoon.

Serious industrial powers have entered the building-scale battery market, such as Japan’s NEC Corp. through its NEC Energy Solutions subsidiary, which owns the former A123 Energy Solutions enterprise. As battery costs decline, the economic attractiveness of battery-storage is continually rising.

GO WITH THE FLOW

In seemingly every race to the energy future, dark horses stalk the frontrunners, threatening to turn careful investments into mere wagers. The future of grid-attached energy storage is possibly not lithium but something termed “vanadium redox flow” or “v-flow” batteries, posited Electric Power Systems Research, a highly cited study from the Technical University of Denmark. Many experts agree.

Washington state–based UniEnergy Technologies is working with the China-based Rongke Power to build the largest battery ever made, a v-flow type, to serve Dalian, a port city in northeast China.

The companies have planned the battery installation at 200 megawatts initially, about double the size of the Tesla 100-megawatt colossus Down Under. But in phases, the Dalian Battery will be scaled up to 3 gigawatts or about 30 times the Tesla battery in South Australia.

Both UniEnergy and Rongke Power are private companies and not investable yet, and vanadium plays are scant, with no vanadium futures market.

For investors charged up about vanadium, there is the small-cap Energy Fuels, a U.S.-based mining outfit listed on the Toronto Stock Exchange. Not a pure play, the company digs uranium out of the earth along with vanadium, and the company’s stock has been a laggard for years. Still, vanadium prices have quadrupled in the past year.

For investors who embrace risk, Prophecy Development Corp., also listed on the Toronto exchange, is a micro-cap developing a Nevada vanadium mine from scratch. Also for the intrepid investor is Redflow Ltd., trading in Sydney on the Australian Stock Exchange. Redflow is an early-stage micro-cap manufacturer of flow batteries, using zinc-bromide rather than vanadium. The company’s name is also indicative of its profit picture, but sales have been rising.

For investors who make the right bets on flow batteries, the future could be rewarding.

The underlying investor takeaway on v-flow technology is the same as sodium-metal glass batteries, or other solid-state batteries: V-flow batteries may sharply curtail what appears to be a bright future for lithium.

SUNNY SKIES FOR SOLAR

The word on solar power hardly varies decade after decade: Solar is getting cheaper and soon will be competitive, even against low-cost natural-gas power plants. In fairness to solar enthusiasts, in 2008 oil was at $147 a barrel and natural gas at multiples of today’s price, so some of the optimistic outlook of yesteryear can be excused.

Team Sol is not without merit; the cost of solar panels installed at the residential level has fallen by 61 percent in the seven years ended first quarter 2017, reported the U.S. Department of Energy. Fixed-axis utility-scale solar power costs fell even more, tumbling 77 percent.

As solar panels get cheaper, they become a less important cost factor in installation. But labor and administrative bills, considered “soft costs,” do not tend to shrink, as solar installation is relatively labor and management intensive.

For U.S. and offshore purveyors of solar power modules, the future is further fogged by the Trump administration inquiry into whether tariffs should be levied on imported panels. Trump was scheduled to decide by Jan. 26 whether to institute tariffs recommended by the U.S. International Trade Commission in late 2017.

For those not dimmed by an unpredictable playing field, the Guggenheim Solar ETF is a play on the solar industry that offers diversity. The ETF was up nicely in 2017, near a 50 percent gain, but well off 2014–2015 highs. Indeed, some say 2017 was the year the solar power industry finally experienced daybreak, becoming cheaper in many applications than even its nemesis, natural gas. The “solar is cheaper than gas” declaration can depend on whether the climate-changing results of burning fossil fuels is factored into costs, or on which region of the nation or world is under discussion. Across the northern, less-sunny half of the United States, natural gas is still cheaper.

Globally, the experts at Bloomberg New Energy Finance say wind and solar will become the lowest-cost option in most regions around the world within a decade. If the Bloomberg outlook is correct, the Guggenheim Solar ETF appears well positioned with its global portfolio.

FOSSIL FUELS

The future may belong to batteries and renewable power sources, but there will be plenty of demand for cheap fossil fuels for many decades to come. The global surfeit of natural gas, due in large measure to new technologies deployed in U.S. shale drilling, has driven global natural gas prices down, but that same glut is also making liquid natural gas a commodity of choice for many.

The outlook for natural gas prices is uncertain, with some pundits holding that lower prices of the past several years have cramped new exploration, and that will translate into higher prices soon. Others say China is drilling shale for oil and gas, and if the Chinese production of natural gas rises, a large export market for natural gas goes up in smoke, softening markets again.

Big Board–listed Cheniere Energy is nearly a pure play on liquid natural gas, as it operates several large natural gas export plants along the Gulf of Mexico. With oil-and-gas drilling technologies evolving, Cheniere would appear to have access to abundant North American supplies of natural gas for decades to come, and a way to ship the product globally through the growing fleets of tankers it has in operation. Wall Street likes Cheniere, now near 52-week highs, though off from 2014-2015 highs. The company pays no dividend, so investors must anticipate appreciation to make a graceful exit. If fossil fuel prices ever spike again, Cheniere might be well placed to surge in value.

Benjamin Cole (7continents7@gmail.com) is a freelance writer based in Thailand.