Energy Alerts, May 20, 2015

The hydraulic fracturing boom has unlocked massive new supplies of natural gas, and in the process has driven gas prices to rock-bottom levels. But signs of building gas demand suggest that a long-term price recovery is in the works.

Since 2010, the benchmark price for natural gas futures contracts has mostly held below $5 per million British thermal units (MMBtu). Frequently, the price has dipped as low as $2 per MMBtu, as drillers from Pennsylvania to Texas have raised output from previously uneconomical gas deposits buried in shale and other hard-to-drill rock.

The flood of new supplies has been dramatic. U.S. gas production rose more than 32% from January 2010 to January 2015, vaulting the U.S. into the top spot among gas producers worldwide. That’s good news for gas users, since more supply has helped push prices down, but bad news for gas producers, for the same reason. The number of rigs actively drilling for natural gas has plummeted, from more than 800 in January 2010 to a bit more than 200 today. And yet output continues to soar: The Department of Energy figures supply will rise a healthy 6% this year from 2014’s already-high level.

It might be tempting to assume that gas prices will remain low for the foreseeable future. However, demand is also on the rise, and it figures to ramp up further in coming years as the U.S. burns more gas for everything from generating electricity to fueling trucks and ships.

Power Shift

Take power plants. In 2010, the share of electricity generated by burning natural gas was a modest 24%, versus nearly 45% for coal. But because of tougher environmental regulations that are forcing many coal plants to close, the DOE expects gas to generate 31% of the nation’s power in 2015, versus 36% for coal. (The total amount of power generated this year will likely come in right around 2010’s level because of stagnant growth in demand for electric power.)

With even more coal plants slated to be retired over the next few years, utilities will increasingly call on gas to help take up the slack. Renewables are still in their infancy, and new nuclear plants are proving extremely expensive to build, meaning that neither of those sources can easily replace the amount of coal-fired capacity being lost. The DOE estimates that the coal plants closing this year alone accounted for 1.6% of all power generated in the U.S. last year. That’s a lot of megawatt-hours to replace.

Gassing Up

Demand for gas is also growing from a surprising source: Fleets of trucks switching from costly diesel fuel to cheaper compressed or liquefied natural gas to save on fuel costs. Though still a tiny slice of total demand, gas consumed by vehicles has risen more than 17% over the past five years. Much of that growth has come from an expanding fleet of gas-powered garbage trucks and other trucks that follow relatively short, predictable routes served by dedicated natural gas fueling stations.

The recent slide in diesel prices has made switching to new gas-powered trucks less compelling. Clean Energy Fuels, an installer of CNG and LNG fueling stations that has benefited from the recent gas-to-diesel shift, expects a bit of a slowdown in 2015, says spokesman Gary Foster. But the company continues to open new fueling stations and believes truck fleets will gravitate to gas in the long run.

Foster says that even with diesel prices down from last year, gas still costs less than the energy-equivalent amount of diesel. As oil prices rebound, that advantage should widen again. Plus, he says, builders of truck engines are starting to introduce more models that run on LNG, which should hasten adoption in a few years.

And note that even ship owners are starting to take a harder look at gas as an alternative to cheap but polluting bunker fuel. One company, TOTE, is commissioning the world’s first oceangoing containerships powered by LNG, the first of which is scheduled to enter service late this year. TOTE CEO Anthony Chiarello says the firm is moving to clean-burning LNG to meet tightening rules on maritime emissions that govern ships traveling within 200 miles of the coast of the U.S. and other participating countries. At $350 million for two new LNG-powered vessels, it’s an expensive solution, but Chiarello predicts that other shipping lines will follow suit in five to 10 years.

Exports Ramping Up

The U.S. has long been a net importer of natural gas. But that’s about to change, once a handful of LNG export terminals begin liquefying some of America’s newfound gas riches and loading it onto tanker ships bound for Europe and Asia. The first export terminal, Cheniere Energy’s Sabine Pass facility in Louisiana, is slated to begin shipments as soon as the end of the year. Four more export terminals — from Cheniere, Dominion, Freeport LNG and Sempra Energy — are also in the works and scheduled to come on line by 2019.

Combined, those terminals will be able to export about 9 billion cubic feet of gas per day when they’re fully operational. That represents a bit less than one-eighth of all the gas consumed in the U.S. in February (the latest month for which output data is available). Gas exports via pipeline to Mexico also figure to climb.

Price Outlook

So where do gas prices go from here? After briefly surpassing $6 per MMBtu during the “polar vortex” cold snaps of last year, gas has gradually trended down, to about $3 per MMBtu today. Amazingly, even the brutal cold that sent gas demand in the Northeast to all-time records this past winter couldn’t nudge prices higher.

Predicting short-term gas price movements is notoriously difficult, says Stephen Schork, who covers energy markets as editor of the Schork Report. “Traders have had their faces ripped off” guessing wrong on which way the market will move next, he says. Anything from an unusually cool spring to a freak summer heat wave can roil prices.

But in the longer run, gas prices look poised to trend higher. Demand not only will keep rising, but the rise will accelerate as the U.S. simultaneously generates more power from gas and exports more to overseas markets. Prices will stay volatile, but we see them heading toward an average of closer to $4 per MMBtu than the $2-$3 level that has prevailed in recent years. Bouts of prolonged summer heat or winter cold could cause higher spikes.

Gas consumers should figure on their bills rising over the next couple of years and act accordingly. That might mean locking into a long-term supply contract if the price on offer seems right; investing in insulation to reduce winter heating needs; or replacing old, inefficient gas appliances.

Higher gas prices bode well for gas producers. The biggest suppliers, such as Chesapeake Energy, Anadarko, Devon Energy and Southwestern Energy, figure to reap the biggest profits when prices do turn higher.

Energy Alerts, May 6, 2015

Oil prices have rebounded from their winter lows. But the oil industry isn’t out of the woods yet.

Since St. Patrick’s Day, when West Texas Intermediate — the U.S. crude oil benchmark — bottomed out at $43.46 per barrel, oil has been on a tear. At today’s price of $60 per barrel, WTI has rebounded by more than 30%.

A few key factors have fueled that rise. First, the amount of crude held in storage is no longer soaring the way it was this past winter, when investors fretted that storage depots would run out of physical space to hold all of the oil coming out of shale fields from Texas to North Dakota. In recent weeks, the Department of Energy’s weekly data has shown only small increases in stockpiles.

Oil is no longer piling up in storage so quickly because refineries are buying more and turning it into motor fuel. Demand for gasoline has been strong this spring, thanks to continued modest hiring gains that are putting more folks behind the wheel as they commute to new jobs. Plus, cheaper gasoline is likely spurring more travel. As a result, the Department of Transportation reports that Americans are driving more miles than ever before. (See page 2 of the DOT report for historical data.)

And, finally, U.S. oil output has hit a plateau. After growing sharply last year and during the early months of 2015, daily output is now holding fairly steady at a bit less than 9.4 million barrels. Chalk it up to the huge reduction in drilling activity prompted by the sharp drop in oil prices that started last year. The number of rigs actively drilling for oil is down more than half from last autumn, and will likely keep falling. That, in turn, means U.S. oil output might start falling fairly soon.

All of that is bullish for prices. But nobody in the oil industry is breathing a sigh of relief yet.

First of all, another price drop can’t be ruled out. Stephen Schork, editor of the Schork Report, a daily publication that analyzes the fundamentals of energy markets for professional traders, thinks the recent price rebound in oil is overdone. Refineries are buying lots of crude now to take advantage of large profit margins on refined fuel, a buying spree that he believes won’t continue. That could spell another “leg down” for crude prices sometime before summer arrives.

Companies in the oil patch are all too aware of that possibility, and they are investing accordingly, paring drilling budgets and looking everywhere for cost savings. One Texas-based energy consultant, who requested anonymity so he could speak freely, says that “caution is the MO” right now as drillers focus on their most promising oil fields and cut spending everywhere else.

That means targeting areas with lower drilling costs, such as the Eagle Ford Shale in Texas, and avoiding higher-cost plays such as North Dakota’s Bakken Shale. (Bakken producers are also handicapped by the lack of pipeline capacity there, which causes North Dakota crude to trade at a significant discount to WTI.)

But even Texas is seeing reduced drilling investment. The Railroad Commission of Texas, which regulates state oil and gas production, reports that it granted fewer than half as many oil drilling permits in the first three months of 2015 than it did during the same period last year. The same story is playing out just about everywhere in oil country. In Louisiana, for instance, drilling activity has fallen to 1970s levels, says Ragan Dickens, director of communications for the Louisiana Oil & Gas Association. The downturn has been especially bad for the many oilfield services companies based in Louisiana that do business in other oil states, he says.

The Upshot for Investors

We look for oil prices to gradually grind higher, with WTI ranging from $60 to $65 per barrel by August and a tad higher in September. But even if that pans out, markets figure to stay volatile, and many firms in the oil industry will remain under pressure.

So where does that leave investors who are trying to size up the oil industry? In the short term, it seems clear that companies that refine or transport crude and petroleum products are in better shape than companies that pump oil out of the ground. Energy expert Schork favors refiners, which are benefiting from relatively affordable oil and the recent run-up in gasoline prices. That makes refiner Phillips 66 a more profitable bet than Conoco, its former parent, he says. If you’re interested in energy master limited partnerships, “you’ve got to stay away” from those that produce oil.

Firms that provide services to oil drillers appear to be especially risky bets in the near term, too. The anonymous Texas energy consultant says he knows of service providers that are slashing their rates below cost, simply to hang on to clients that are demanding big discounts. By contrast, the integrated oil majors that both produce and refine oil are more insulated from such pressures. Firms such as Exxon, Shell and BP are making less on the oil they’re pumping, but their huge refining operations help offset those losses.

Tesla Powers Up the Battery Market

A few weeks ago, we wrote about the growth prospects for the energy storage business. Right on cue, electric car maker Tesla has announced a new line of lithium-ion batteries that it will begin selling to homeowners, commercial customers and utilities this summer.

We’ll reserve judgment on the quality of Tesla’s batteries until customers start testing them, but there’s no question that this is a sign of the energy storage industry’s future. At $3,500 plus installation, Tesla’s battery should be a compelling option for both homeowners and businesses looking to guard against blackouts or store energy generated during the day by rooftop solar panels.

Electricity customers whose utilities charge “time of use” rates that vary during the day could especially benefit from the growing supply of large batteries. Such plans charge higher rates during times of peak demand and lower rates at night or during mild weather. Customers who can charge a large battery when prices are low and then run their homes or businesses with that stored energy during the day when rates are high will be able to shave their electric bills, perhaps substantially.

According to the Department of Energy, in 2013 (the most recent data available) more than 4 million residential customers were covered by time-of-use pricing plans. It’s a near certainty that such pricing will expand in the years ahead as utilities look to manage peak demand for power without building expensive new power plants.

Energy Alerts, April 22, 2015

Whether you’re a homeowner, a renter or a business owner, and regardless of the energy source you rely on for heating, cooling and lighting, there is one simple way to save on your energy bill: Use less energy. To help you do so, this issue of Kiplinger’s Energy Alerts (issues are free through June 9) outlines ways to shave your utility costs, from making quick and easy changes to investing more substantially in energy efficiency.

Small Steps to Save $$

In our digital age, home and office electronics gobble more and more of the electricity we use — even when our devices are off. The American Council for an Energy-Efficient Economy (ACEEE), which encourages energy-saving practices and advocates for tighter efficiency standards, reckons that the electronics in an average American home draw about 50 watts of power when turned off or left in standby. That doesn’t sound like much, but it adds up to 440 kilowatt-hours per year. Since the average electric rate paid by households in America was 12.5¢ per kilowatt-hour last year, that works out to $55 per year in wasted energy.

Luckily, it’s easy to keep some of that money in your pocket. Unplug appliances and devices you rarely use — say the TV in the guest bedroom that’s rarely watched. And plug items you do use frequently into power strips that can be turned off by flipping a single switch. If you have a home office with a laptop, a printer and computer speakers, for instance, keeping them truly “off” when not in use saves about 9 watts of power.

Don’t overlook easy steps to save a bit on heating and air-conditioning, too. Remember to change the filter on your furnace, AC or heat pump. The system has to work harder to circulate air through a dirty filter, thus wasting energy.

Consider dialing down the temperature setting on your water heater. An easy way to check: If your hot water tap runs more than 120 degrees on a kitchen meat thermometer, your heater is probably set too high, says ACEEE research analyst Rachel Cluett. Also, use the “low” or “vacation” setting when you’re away for several days. (No sense heating water you won’t be using, right?) And if you have an older water heater with fiberglass insulation instead of more-modern foam, pick up a water heater insulating blanket from the hardware store.

Thinking Bigger

To trim your energy costs further, you’ll likely need to invest more time and money.

Take lighting, for example. The federal Energy Information Administration estimates that lighting accounts for 15% of the electricity consumed by both homes and businesses. More-efficient lighting products hold big potential savings. Both compact fluorescent bulbs and light-emitting diodes use far less energy per unit of light output than do traditional incandescent or halogen bulbs.

But are the up-front costs worth the long-term energy savings? A CFL bulb that mimics the light output and shape of a 60-watt incandescent can cost a few dollars. An equivalent LED can easily run $10 or more.

To earn back that investment quickest, install high-efficiency bulbs in the fixtures you use the most. (And bear in mind that CFL bulbs generally aren’t dimmable, so they won’t be suitable for every fixture.) To gauge the time required to break even on your up-front expense and start saving on your electric bill, use a calculator such as this one. You can input the prices of two different types of lightbulb (say a traditional incandescent versus an LED), how many hours the bulb will work every day, and how much you pay for electricity.

For instance, swapping a 60-watt incandescent bulb for a nine-watt LED that costs $10 and runs four hours a day, at an electric rate of 12¢ per kilowatt-hour, will break even in about 13 months and then save the user $9 per year. (It helps that LEDs generally last much longer than traditional bulbs.) Multiply that by a dozen or more bulbs, and the annual savings start to look sizable.

When It’s Good to Get Audited

For a more general approach to saving on your energy bills, consider calling in a pro to perform a whole-house energy audit. ACEEE’s Cluett, who used to perform these inspections for homeowners in Maryland and Virginia, says the idea is to identify where your home is losing heated or cooled air – letting you target insulation and air sealing to the places that need it most.

To find a qualified auditor, check with your state energy office or your utility. One or the other should be able to recommend experienced auditors in your local area and can also tell you about any incentive programs from your utility that might pay for some or all of the inspection. Cluett says a typical home audit costs roughly $400, but rebates from the utility could trim that significantly.

Insulating and air sealing a home aren’t cheap. But the payback can be substantial, assuming you plan to live in the home long enough to reap the benefits. The U.S. Department of Energy says that proper insulation and air sealing yields a 15% saving on the average home’s heating and cooling bills.

Businesses with large facilities can expect to pay much more for a customized energy audit. But note that many utilities will pay for part or all of the expense if the firm adopts the energy-saving recommendations generated by the audit.

Cooling Your Summer AC Bills

If you live in a region with hot summers – or hot weather year-round – your air conditioner probably adds a hefty amount to your electric bills. ACEEE estimates that cooling accounts for 17% of residential energy bills (second only to heating, at 26%). So helping your current AC run more efficiently, or upgrading to a new unit, has the potential to save you some real money.

Wes Davis, vice president of quality assured programs at the Air Conditioning Contractors of America, says there are a few things consumers can do to make sure their systems are running at peak efficiency. Aside from replacing dirty air filters regularly, he recommends gently washing the aluminum fan blades in the outside compressor unit with a garden hose to remove debris so the fan can move air as efficiently as possible.

Need to replace your air-conditioning unit because it’s on the fritz, or nearing the end of its useful life (roughly 20 years)? Ease the hit to your wallet by springing for a highly efficient new unit that will lower your future electric bills. Davis says that the best ACs available today are about 60% more efficient than the units commonly installed two decades ago. He recommends models with variable speed motors, which let the system throttle back when less than full cooling is needed.

But whatever type of air conditioner you buy, the key to maximizing its efficiency is proper installation. Davis says most brands on the market today are reliable – what matters is selecting a system that is the right size for your home and making sure that the ducting is well insulated and sealed. So seek out a good contractor to do the job (interview a few of them, and use this ACCA checklist to ask them the right questions). “This isn’t like buying a refrigerator at the big-box store,” Davis says. Getting the installation right is essential to keeping you cool, and to saving you money.

Energy Alerts, April 8, 2015

Welcome to Kiplinger’s Energy Alerts — a digital heads-up on coming trends and breaking developments in the energy industry. The alerts are free through June 9. In this issue, we zero in on what’s shaping up as a momentous year for the U.S. oil market: Oil prices are down, U.S. crude production is up, and many Americans are ditching fuel sipping compact cars for pickup trucks and SUVs like it’s 1999, boosting gasoline demand. And we’re only in April. Here’s how I see the remainder of the year for U.S. and global oil markets plus my read of oil supply-and-demand trends over the longer term.

Outlook for the Rest of 2015


Oil production in the U.S. figures to remain robust, despite a small dip this spring or summer as oil firms drill fewer new wells in response to the big drop in crude prices. At more than 9 million barrels per day, crude output is nearing its all-time high, set in 1970. Factor in the 5 million barrels of biofuels, propane, butane and other liquid hydrocarbons the U.S. churns out each day, and daily petroleum output jumps to almost 15 million barrels — about three-quarters of total demand.

The U.S. will continue to be the number three producer of crude, after Russia and Saudi Arabia.


Given the surge in production, it’s no wonder U.S. dependence on imported oil and refined fuels is plummeting. Imports from the Organization of Petroleum Exporting Countries (OPEC), the international oil producers cartel, are down more than half since 2008. Nigeria, long a key supplier to the U.S. market, now sends virtually no crude at all to American shores.

Odds are that net imports of foreign petroleum — meaning total imports minus oil or refined products that the U.S. exports — will approach zero by the end of this decade. Plenty of oil and fuel will still flow in and out of the U.S. market, but dependence on foreign suppliers to make up the shortfall in domestic production will fade away.


Meanwhile, exports of U.S.-refined fuel will keep surging as American refiners take advantage of abundant crude and excess refining capacity to ship gasoline, diesel, propane and other products abroad. Bill Day, spokesman for Texas-based refining giant Valero, says the firm recently exported about 10% of its gasoline production and roughly a quarter of its diesel output. Most of those sales go to Mexico and other Latin American buyers, an “increasingly important” market, he says.

Strong foreign demand for refined fuel is especially good for U.S. refiners because of the long-standing ban on exporting most American crude oil. Sales of refined products face no such limit, so American refineries can buy U.S. crude at a discount to foreign benchmarks but still sell their refined products at regular market rates. Plus, as Valero’s Day notes, U.S. refineries use cheap American natural gas to power their plants — a big cost advantage compared with foreign rivals.

But note that exports of U.S. crude oil are quietly on the rise. Sales to Canada are generally exempt from the export ban, and Uncle Sam has also OK’d exports of condensate, a very light form of crude recently deemed eligible for export if it undergoes some simple chemical processing. Exports of condensate hit 80,000 barrels per day in January, up sharply from last year. At least one exporter, Enterprise Products Partners, aims to significantly ramp up its condensate exports this year. The company is seeing growing demand from Asian buyers.


Even as other countries buy more U.S.-made fuels, Americans are filling gasoline tanks more often, too. After trending down in the wake of the Great Recession, total U.S. petroleum demand is on the rise again. An economy generating more jobs spells more drivers who need to fuel up, and the recent tumble in gasoline prices is encouraging folks to drive more for pleasure as well. This summer figures to be the busiest travel season since before the recession, and gasoline sales could potentially exceed the peak set in August 2007, when drivers purchased more than 400 million gallons every day.

Looking Beyond 2015

Don’t expect this year’s big jump in fuel consumption to become the new normal. What we’re currently seeing is an unusual combination of faster economic growth and relatively cheap gasoline, which is spurring demand.

In the longer term, oil consumption is likely to resume the gradual decline that began in 2007, when total U.S. oil usage peaked at about 22 million barrels per day. Two big factors explain why.

First, Uncle Sam is determined to see the country burn less fuel over time. The government’s latest fuel economy rules require manufacturers to ramp up the mileage of their new vehicles, with a target of 54.5 miles per gallon for 2025 models. John O’Dell, green cars editor for, says that the 54.5 mpg figure reflects a complicated formula the government uses for figuring fleetwide fuel economy and that future vehicles will have to average about 40 mpg in real-world mileage tests to meet the 2025 goal. Still, that’s nearly double the average fuel economy of today’s new cars, he says.

So look for automakers to invest in a slew of fuel saving technologies: Thriftier gas engines; hybrid cars that can run on battery power for short distances; fuel cells that combine hydrogen and oxygen to generate electricity; and electric cars that plug into the electric grid. Edmunds’s O’Dell reckons that all these approaches are needed to keep up with ever-tightening mileage regulations.

Moreover, even as automakers race to save gas, younger Americans are turning away from driving altogether. The American Public Transportation Association reports that 2014 saw the highest ridership on subways, buses and other public transportation in 58 years. Transit officials in cities attracting millennial residents, such as Austin, Texas, and Denver, are seeing especially heavy growth in transit usage. Automakers hope to eventually win over these carless young consumers with tech-heavy small cars that fit better into urban landscapes. But they face an uphill battle to alter what looks like a generational shift away from car ownership.

Tech Alerts, April 1, 2015

Welcome to our second free trial issue of Kiplinger’s Tech Alerts, a digital heads-up on trends and breaking developments in the technology industry. Tech Alerts will come to you by e-mail every other week. This week’s issue focuses on how the sky’s the limit for business uses of commercial satellites. We’ll also take a look at the Apple Watch and other wearable tech as well as ways to share the airwaves and more.

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Energy Alerts, March 25, 2015

Welcome to our second free trial issue of Kiplinger’s Energy Alerts, a digital heads-up on coming trends and breaking developments in the energy industry. Energy Alerts will come to you by e-mail every other week. This week’s issue zeros in on how battery technology — so vital to the future of sustainable power distribution — is advancing and on which areas of battery research show the most promise. We also provide a road map for energy investors attempting to navigate the big tumble in oil prices.

Keep in mind that you have a standing invitation to e-mail me anytime with questions on any aspect of energy you’re interested in — no matter how large or small the issue — and I’ll run down the answer for you. The positive response to our inaugural issue was overwhelming. Thank you for the many comments, suggestions and insights. Please keep letting us know how we’re doing.

As noted in our previous issue, solar power is growing rapidly in the U.S. But given its intermittent nature, much of it will go to waste — unless utilities and solar customers have a cost-effective way to store the energy during sunny periods and tap into it at night.

Affordable energy storage is seen as a key to the future of electricity distribution that will let utilities meet heavy power demand while better harnessing wind, solar and other variable energy sources. Such a storage system is the pursuit of a wide array of researchers, tech firms and utilities.

Most of the energy industry is placing bets on better batteries to do the job. Though large-scale lithium-ion and other advanced batteries are still expensive, the costs are coming down enough that utilities are eyeing them as a way to synchronize increasing volumes of on-again, off-again wind and solar power with ever-changing demand for electricity.

The Energy Storage Association, which represents companies that make or design batteries, flywheels and other storage tech, sees 2015 as a breakout year for adding battery capacity to the electric grid. The ESA projects that 220 megawatts of energy storage capacity — most of it in the form of lithium-ion and other batteries — will come on line this year. That’s more than double the capacity added in 2013 and 2014 combined.

California is pushing hardest to ramp up grid-scale storage, with a mandate that utilities install more than a gigawatt of capacity by 2020. But utilities in Arizona, Texas, Hawaii and elsewhere are also sizing up batteries as part of their future energy mix.

Utilities want to meet spikes in power demand without having to build new power plants that will sit idle most of the year when demand is lower, says ESA Executive Director Matt Roberts. He pegs the cost of utility-scale batteries at about $1,500 per megawatt-hour, roughly the amount of power consumed by an average home in one month. While that’s not cheap, it’s competitive with backup, or “peaker” power plants, the traditional tool for boosting generation during surges in power demand. Plus batteries can potentially deliver more energy to the grid in less time than a power plant could.

Lithium-Ion and Beyond

Of all the new batteries hooking up to the grid this year, ESA expects 70% to be lithium-ion, the same type that’s powering cell phones, laptops and tablets. Although lithium isn’t an abundant material in the U.S., a growing number of manufacturers are betting that the cost of lithium-ion batteries can be driven down enough to make large versions attractive for utility-scale storage and other industrial applications.

Electric-car maker Tesla is working with Panasonic on a huge lithium-ion battery factory in Nevada that Tesla claims will single-handedly churn out more batteries in 2020 than the entire world produced in 2013. In the process, the company says it’ll cut the cost of batteries for its future electric cars by more than 30%. Some of those batteries also figure to find their way into rooftop solar power systems installed by SolarCity — Tesla cofounder Elon Musk just happens to be its chairman — and other solar firms.

The cost improvements in lithium-ion that Tesla is targeting should be attainable. Larger, more efficient manufacturing processes of the sort that Tesla, Chinese electric-vehicle maker BYD and other producers are planning promise to cut battery prices significantly.

Researchers hope even bigger gains can be realized by using new chemistries that either hold more energy than lithium-ion batteries or feature cheaper components. Nowhere is the quest for such game changing advances more intense than at the Joint Center for Energy Storage Research, a collaboration among the Department of Energy’s national laboratories, universities and private companies hoping to commercialize the next big thing in battery tech.

JCESR is rushing to do in a few years for advanced batteries what private industry spent decades doing for lithium-ion: assemble a huge body of scientific knowledge that will enable a wave of commercial products.

After modeling thousands of candidate materials via high-power computers, the initiative has identified about 30 promising electrolytes for further study, says JCESR Executive Director Jeff Chamberlain.

This sort of research — involving computer modeling to evaluate the advantages, disadvantages and costs of potential batteries from many different materials — is painstaking. But it’s “really exciting to us nerdy scientists,” Chamberlain says, because it helps them understand the underlying physics of advanced batteries and avoid pursuing ideas that won’t ultimately deliver the dramatic improvements in cost and performance that JCESR is seeking.

For instance, the research team initially thought that lithium-air batteries held great promise, but concluded that they pose some hefty engineering problems. So instead they’re concentrating more on magnesium-ion technology, with patents in the works. (For a deep dive into what the group has been up to, click here.)

Chamberlain says his group has some exciting news coming on flow batteries, which store chemical energy in fluid solutions that have the potential to pack a lot of power very efficiently. That research is confidential for now, but he expects a major announcement later this year.

Energy Investing

Because so many readers wrote in two weeks ago asking about investing in energy-focused master limited partnerships, or MLPs, I’m citing a recent piece by my colleague, Jeff Kosnett, who addressed this very topic in the March issue of his newsletter, Kiplinger’s Investing for Income. Commenting on which MLPs look like the best investments given the big fall in oil prices, Jeff had this to say:

The best segment continues to be midstream, and so we would put at least one-half, if not two-thirds, of any MLP portfolio there. Gainers since July include Energy Transfer Partners (ETP), Magellan Midstream Partners (MMP), Phillips 66 Partners (PSXP), Sunoco Logistics Partners (SXL) and TC Pipelines (TCP). Others, including … Plains All American Pipeline (PAA), nearly broke even. More important, midstreamers tend to increase distributions every three or six months, and they do that from operating revenue and not from fresh capital raised by selling stock or bonds.

“The midstream guys have enough cash around for the foreseeable future,” says John Cusick, an MLP analyst for Miller/Howard Investments. His test is that cash flow be at least 1.2 times distributions. That is, if an MLP pays $1, it should have at least $1.20 in cash flow. All six names above qualify. You can expect their distributions to grow 5% to 8% a year.

Tech Alerts, March 18, 2015

Welcome to the inaugural issue of Kiplinger’s Tech Alerts, a digital compilation of coming trends and breaking developments in the technology arena. Tech Alerts will come to you by e-mail every other week. This week’s issue focuses on developments growing out of the Federal Communications Commission’s recent network neutrality action, with quick takes on smart watches, commercial drones and other topics.

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