RE: Exit strategy17 Nov 2022 12:25
I will not be too hasty in exiting on good news. Maybe a top slice at 50p once they've announced funding and start laying infrastructure. I still find 16p-20p a good price to DCA in at, so will continue to accumulate on the dips.
I think there is quite a high probability that the world is entering another decade-long energy/commodity bull cycle. I can understand some people's weariness when it comes to underperforming energy stocks, because the truth is; energy stocks have, in the main, been cr@p performers over the last 10 years. Overall, we've been in an energy/commodity price bear market, but these things tend to work in cycles and revert back up when there's a supply/demand imbalance (which we have).
Regardless of all the political & ESG talk taking place – the reality is that most of the world's electricity is still being produced by burning coal.
Take a look at this chart.
https://ourworldindata.org/grapher/share-elec-by-source
Since 2010 a lot of wind turbines and solar farms have been built around the world, but they just aren't touching the sides when it comes to replacing coal.
Since 1985 and beyond, coal has been responsible for providing between 35-42% of the world's electricity. It is the baseload power source. Even today, after 10 years of building alternative sources of electricity production, coal still sits within the historically high 35-40% band.
Nuclear is clean & you get a much bigger bang for your buck, but nuclear plants take a decade or more to build because of all the red tape involved and look at Nuclear on that chart – it's been in a downward trend as part of the energy mix since 1995.
That leaves gas.
Gas burns much cleaner than coal & releases half the amount of CO2. So as a transitional source, it makes a lot of sense to replace coal with gas.
Coal power stations can easily be converted to gas – you don't need to rebuild the coal power stations, just switch them to gas and reduce CO2 emissions by 50%. It's a good medium term solution.
If you look at the chart from 1995, you can see that gas has increased as a percentage of the world's energy mix (slight dip after Russia invaded Ukraine). If that trend continues as it has been doing since 1995, then gas will continue to close the gap on coal and may well eventually supersede it.
The conversation over net zero will continue, but with a simple switch from coal to gas you get a 50% reduction in CO2 emissions. It may not be the silver bullet that politicians are looking for, but it's a relatively easy adjustment to make that buys them some time. A 50% reduction in CO2 is a lot!
Chariot will go a long way towards Morocco moving away from coal. Maybe even completely.
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