How to Invest in the Energy Source of Tomorrow

The carbon-free renewable energy craze has about run its course. Wind and solar power don’t work without massive government subsidies and tax credits. They also don’t work when the sun doesn’t shine, or the wind doesn’t blow. Still, humanity needs reliable energy. But traditional nuclear power plants are too expensive to build and operate economically, and small modular reactors (SMRs) are at least a decade away from being a viable source of energy.

Natural gas is abundant, relatively low-cost, and clean -burning. It can be used as both a source of heat and to generate electricity. Liquified natural gas (LNG) provides an efficient way to move natural gas from the areas of production to wherever it is needed.

In a recent article, VettaFi discussed the growth potential of LNG processing. The current U.S. LNG export capacity is 14 billion cubic feet per day (Bcf/d). Current projects under development will grow that capacity to 25 Bcf/d by 2028, which is close to 80% growth in four years.

The rest of the world will also grow its LNG capacity. Since humans currently derive almost 30% of the energy they use from burning coal, there is plenty of opportunity for expanded LNG production to replace coal with a cleaner- burning fuel. The U.S. will remain the largest producer of natural gas and the largest exporter of LNG.

The VettaFi article made me aware of the  Alerian Liquefied Natural Gas Index (ALNGX). VettaFi is the owner/sponsor of the Alerian indexes group. ALNGX is a global index. About 37% of the market cap is in the U.S., and 25% is Australian. Ten other countries have much smaller allocations. Here are the top holdings:

Some interesting stocks on this list deserve further research.

There is also a tracking ETF. If you want to get LNG exposure through the ALNGX holdings, consider the Roundhill Liquified Natural Gas ETF (LNGG).