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For nearly twenty years the world has watched the command economy of China sprint through a massive industrial revolution while India, a fractious democracy, has largely stagnated. The landslide victory of the pro-growth BJP Party in last month’s elections, however, signals the most important new direction for India in over half a century. Consider that India has 90% of the population of China, but only 20% of the energy consumption, and the scope of the growth potential becomes more clear. This month, we consider two energy scenarios for a broadly growing India. One path leads to an All of the Above strategy, with India increasing energy inputs from all sources. The other emphasizes renewables, enough so to kick the trajectory of global wind and solar power to even higher levels of growth. Regardless of which path India takes, the potential new call on energy resources is roughly equal to the 400M Indians currently unserved by any energy at all: a veritable new country arriving on the world stage. The direction India takes will become, in effect, the energy path of the world.
A newly ascending India is going to have its greatest impact on coal, natural gas, wind and solar. The All of the Above scenario would rely heavily on coal; with natural gas, wind and solar filling in the gaps. Should India take this path the Second Age of Coal will last long after the year 2025. The other direction, the Strong Wind+Solar path, leads more forcefully towards natural gas, wind, and solar. Indeed, using natural gas as a growth anchor, (and yes, increased oil use as part of a broader economic expansion) India could restrain its own coal growth to just a 10% total increase to 2025. In such a scenario the new global call on coal is light, while the call on natural gas and renewables is enormous. Our task is to ultimately project how these two very different directions would impact the global energy mix.
Also in this month’s issue:
Portfolio Update: The TerraJoule.us Model Portfolio, which began April 1, 2013, is up +9.28% since inception. Cash levels remain elevated after selling down positions this Spring. We will continue to use the summer months to add back exposure. Accordingly, we will make two changes to the model portfolio as of the New York close, on Monday June 2, 2014.
In 2008, the Non-OECD passed two historic milestones. As of that year, more than 50% of Non-OECD persons became city-dwellers. And in the same year, the five billion people in the Non-OECD for the first time consumed slightly more than 50% of total world energy. We have been anticipating therefore the next crossover point: when Non-OECD demand for oil would also outdistance OECD demand. While data on crude oil alone is hard to come by, according to the EIA, this crossover point occurred this April, when the Non-OECD consumed more oil, natural gas liquids, and other petroleum products, than the OECD. Alas, we cross another threshold.