The energy industry is changing rapidly, as previously dominant fuels such as coal and oil are being supplanted by cheaper renewable energy sources. We can also expect a significant shift in demand due to the emergence of technological innovations such as electric vehicles. And the disruption is far from over, as renewable energy sources and cars today have sold less than 5% of electricity markets and vehicles, respectively.
As this transition from fossil fuels continues, investors will want to place their bets on which energy technologies will shine the brightest. As it stands now, Bloom Energy (NYSE: BE), SunPower (NASDAQ: SPWR), Star Peak Energy Transition Corp. (NYSE: STPK), en General Motors (NYSE: GM) looks like they will be leaders in the future of renewable energy.
The emerging hydrogen economy
The hydrogen economy is getting closer to reality thanks to companies like Bloom Energy. The company builds the technology to turn renewable energy into hydrogen that can be stored or transported and then used to generate electricity where and when needed.
Bloom’s business has been steadily improving over the past three years, with revenues rising and margins improving as the cost of its fuel cells falls. The company continues to report losses as it invests in growth, but its operations are on track, and if the hydrogen economy starts, it will be well positioned to capitalize.
BE Revenue (TTM) Data by YCharts
One product that Bloom Energy is currently focusing on could be a game changer for the company: it is developing an electrolyzer that will use electric wind or solar power to produce hydrogen for use in its fuel cells. Management says this clean hydrogen will be cost-competitive compared to fossil fuels, which will open a $ 2 billion energy market for the company. The electrolyser is still in a prototype phase, but commercial operations are expected to begin on a small scale later this year.
There is a lot of uncertainty about how much hydrogen will play in the energy market of the future, but as a leader in hydrogen on an industrial scale, Bloom Energy is likely to be one of the winners of the segment.
Profit from solar energy
The number of solar power systems deployed around the world is still growing rapidly, but the industry has had a large investor over the past two decades. However, as the industry moves into a more mature phase, I think SunPower has a strategy that can deliver profit and growth.
At its core, SunPower is a service business for the residential and solar power markets. It has developed tools for the sale, quotation and installation of solar panels and energy storage systems, but it does not do most installations itself. Instead, it works with dealer partners who supply the boots on the ground for its products.
This gives SunPower a business model that can provide an asset that can yield returns on plant growth. And the company will play an even more critical role as energy storage begins, as it can pool the electricity held in tens of thousands of individual storage systems and offer the assets in competitive electricity markets as virtual power stations.
A unique game in energy storage
Star Peak Energy Transition Corp. is a SPAC that has agreed to merge with pure-play tribe. Voice was one of the first leaders in commercial energy storage and will use the $ 383 million in cash that Star Peak Energy adds to its books to fund its growth in markets such as the US, Japan and Canada.
Voice is trying to learn what he learned to build storage energy systems and use them to turn to a more software-than-a-service business model. This will enable the business to be an energy management business, rather than just a battery business.
The real value of energy storage is not the manufacture of batteries or their installation; it is the management of when and where the stored energy is used. Tribe is a leader in the niche, and therefore it is an excellent way to bet on the future of energy storage.
Image Source: Cruise.
The next giant for electric vehicles
We all know Tesla currently leads the space for electric vehicles, but I think GM offers the biggest EV opportunity for investors. Management has just announced that by 2035 the carmaker will completely switch its product range to electric vehicles and that they have already announced compelling cars such as the Hummer, Bolt and Cadillac Lyriq.
GM also holds a controlling interest in Cruise, which develops autonomous vehicle technology. Cruise and GM are working on a fully autonomous ride-sharing vehicle that GM will manufacture and drive Cruise. This could be an important new growth market.
The old-fashioned carmaker’s share is relatively cheap, earning only 26 times a decline – and that does not mean the potential value of its stake in Cruise, which in itself could be worth more than $ 23 billion. GM is not the biggest name in EVs today, but it could take another decade.
The future of energy will be here before you know it
There is no longer a debate about whether electric vehicles or renewable energy can be viable. It is already cost effective and their prices continue to fall, enabling them to increase their market share. As they do, the companies with the best technology and strongest business models – companies like Bloom Energy, SunPower, Stem and GM – can be big winners for investors.