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The Biggest Energy Market Breakthrough Since Hydraulic Fracturing

It’s Myth-Busting Monday again, which means it’s time to address another bogus (but widely held) belief.

Today, I’m zeroing in on the baloney that renewable energy sources promise to put an end to our use of coal in the United States.

The extreme tree huggers in the bunch – who routinely spit in the face of perfectly logical, economic arguments – insist that we have no choice but to abandon using it. Stat!

Why? Because coal is dirty. It generates too many darn pollutants. And it threatens to do irreparable harm to the Earth.

The reality? The situation is hardly that dire. Here’s the proof…

Just the Facts, Ma’am

If we look at the hard data, it turns out we’ve actually been rolling back the “carbon clock” for years…

Last year, CO2 emissions from coal specifically fell to a 26-year low. Total U.S. energy-related CO2 emissions fell to a 20-year low. And if we adjust for population, CO2 emissions per capita nearly hit a 50-year low.

Voila! We’re right back to the year 1997…

“There is rich irony here,” says The Wall Street Journal’s Matt Ridley. He’s not kidding, either.

As we all know, reducing emissions remains environmentalists’ raison d’être. And yet, they’re getting what they want thanks to one of the “technologies [that’s] most reliably and stridently opposed by the environmental movement,” as Ridley puts it.

He’s talking about hydraulic fracturing, of course.

It’s single-handedly responsible for unleashing the natural gas glut in the United States, which drove down market prices. In turn, utilities couldn’t resist the temptation, economically speaking, to increase their use of natural gas and reduce their use of coal for electricity generation. And voilà!

Since coal emits about twice as much CO2 as natural gas, emissions were all but guaranteed to decline. And they have done exactly that.

As I pointed out about a month ago, though, this isn’t a permanent transition. It’s a result of what the U.S. Energy Information Administration (EIA) calls the “elasticity of substitution.”

In layman’s terms, utilities merely use the most cost-effective power generation source. That means, as market fundamentals move in favor of coal again, they’ll ramp up usage.

Guess what? That’s starting to happen, based on recent comments from Peabody Energy’s (BTU) Chairman and CEO, Gregory H. Boyce.

However, that doesn’t mean CO2 emissions are bound to reverse course and increase uncontrollably as coal usage rebounds.

Based on the research I’ve been doing on various disruptive technologies for MicroCap Tech Trader subscribers, I’m convinced that we’re on the cusp of another technological breakthrough. One that’s relevant to our discussion today.

Out of fairness to paying subscribers, though, I can’t share all the details.

Instead, I’ll simply say this: If a particular company’s combustion technology proves to be as effective in increasing efficiency in coal-burning applications as it has already demonstrated in natural gas applications, look out!

Suddenly, coal won’t be so dirty anymore.

Yes, I’m saying that the future of coal rests on a technological breakthrough that dramatically reduces pollutants – and thereby eliminates the pressure to abandon its use.

Before you chalk that up to an impossible technological feat – and summarily dismiss my argument altogether – realize this…

The future for renewable energy sources rests even more heavily on our ability to innovate. Not only do we need to come up with a viable storage solution, we also need to dramatically reduce costs.

As I’ve pointed out before, renewables remain too darn expensive. Even with heavy government subsidies. And the government knows it, too.

More Double Talk From Washington

President Obama wants to move on from fossil fuels and coal in particular. He considers them “energy sources of the past.” The only problem? The U.S. Department of Energy is broadcasting a dramatically different plan for the future. (Nothing like the government talking out of both sides of its mouth, huh?)

Through 2040, they expect fossil fuels to still serve as the dominant energy source at 80.1%. As for renewables? Well, their contribution barely makes it into the double digits at 10.8%.

That’s pathetic, considering that more than $2 trillion has been invested in renewable energy projects over the last 20 years, according to the IEA. Instead of increasing renewables usage, however, those funds led to a decline from 9.3% in 1948 to 7.5% in 2012. (Can you say “negative return on investment”?)

Bottom line: I’m monitoring technological developments throughout the energy sector. So far, I haven’t seen a noteworthy innovation that could make renewables dramatically more affordable. But I am seeing compelling developments on the coal front.

So for right now, renewables don’t stand a chance at snuffing out coal. And if the company I’m tracking makes clean-burning coal a reality, renewables might never stand a chance of dethroning coal. So stayed tuned, as we could be on the brink of the biggest energy breakthrough since hydraulic fracturing.

I promise to keep you updated on the situation in the months ahead.

Ahead of the tape,

Louis Basenese

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