The energy sector is changing rapidly, as previously dominant fuels like coal and oil are being replaced by cheaper renewable energy sources. We can also anticipate a significant change in demand due to the increase in technological innovations, such as electric vehicles. And the rupture is far from over, as renewables and EVs today account for less than 5% of the electricity and vehicle markets sold, respectively.
As this transition away from fossil fuels continues, investors will want to bet on energy technologies that will shine brighter. How are you now, Bloom Energy (NYSE: BE), Sun power (NASDAQ: SPWR), Star Peak Energy Transition Corp. (NYSE: STPK), and General Motors (NYSE: GM) they seem to be leaders in the future of renewable energies.
The emerging hydrogen economy
The hydrogen economy is closer than ever to reality, thanks to companies like Bloom Energy. The company is developing the technology to transform renewable energy into hydrogen, which can be stored or transported and used to generate electricity where and when needed.
Bloom’s business has steadily improved over the past three years, with revenue growth and margins improving as the cost of its fuel cells decreases. The company is still recording losses when investing in growth, but its operations are on the right track and, if the hydrogen economy takes off, it will be well positioned to capitalize.
BE revenue data (TTM) by YCharts
A product that Bloom Energy is currently focused on could be a game changer for the company: it is developing an electrolyser that will use wind or solar-generated electricity to produce hydrogen for use in its fuel cells. Management says that this clean hydrogen will have a competitive cost compared to fossil fuels, opening a $ 2 trillion energy market for the company. The electrolyser is still in the prototype phase, but commercial operations are expected to start on a small scale later this year.
There are many uncertainties about the role that 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 in the segment.
Profiting from solar energy
The number of solar energy systems deployed worldwide continues to grow rapidly, but the industry has been difficult for investors for the past two decades. However, as the industry moves into a more mature phase, I think SunPower has a strategy that can generate profits and growth.
In essence, SunPower is a service company for the residential and solar markets. It has developed tools to sell, quote and install solar panels and energy storage systems, but it does not do most of the installations alone. Instead, she works with reseller partners who supply the boots on-site for their products.
This gives SunPower a simple business model that can provide leveraged returns on facility growth. And the company will play an even more critical role as energy storage is implemented, because it will be able to aggregate the electricity held in tens of thousands of individual storage systems and offer these assets in competitive electricity markets like virtual power plants.
A unique game in energy storage
Star Peak Energy Transition Corp. is a SPAC that has agreed to merge with the pure-play energy storage Stem. Stem was one of the first leaders in commercial energy storage and will use the $ 383 million in cash that is being added to his books by Star Peak Energy to finance his growth in markets such as the US, Japan and Canada.
Stem is trying to take what he learned from building energy storage systems and use it to transform himself into a software-as-a-service business model. This will allow the company to be an energy management business, rather than just a battery business.
The real value of energy storage is not in making batteries or installing them – but in managing when and where the stored energy is distributed. Stem is a leader in this niche and is therefore a great way to bet on the future of energy storage.
Image source: Cruise.
The next giant electric vehicle
We all know Tesla leads the electric vehicle space now, but I think GM offers the biggest EV opportunity for investors today. Management has just announced that the automaker will transition its product line entirely for electric vehicles by 2035, and has already announced attractive EVs like the Hummer, Bolt and Cadillac Lyriq.
GM also owns a controlling stake in Cruise, which is developing autonomous vehicle technology. Cruise and GM are working on a fully autonomous ride-sharing vehicle that GM will produce and Cruise will manage. This could be a new high-growth market.
The shares of the legacy carmaker are relatively inexpensive, traded for just 26 times the profit – and that does not take into account the potential value of its stake in Cruise, which alone can be worth more than $ 23 billion. GM is not the biggest name in EVs today, but it could be a decade from now.
The future of energy will be here before you know it
There is no longer any debate about whether electric vehicles or renewable energy can be viable. They are already economical and their prices continue to fall, which will allow them to increase their market share. In doing so, companies with the best technology and strongest business models – companies like Bloom Energy, SunPower, Stem and GM – can be big winners for investors.