Why clean energy investing is the future

Hi Freetraders!

This app got me into investing after sitting on the sidelines (I wanted be a stockbroker after university) - after decades. So I love this space, and wanted to hear your views on a topic I’m passionate about.

I’m a writer on climate change and clean energy. And I’m convinced that clean energy is going to be a much bigger thing than people realise. It won’t be an energy transition so much as an energy transformation.

People haven’t yet realised how cheap clean energy :sunny: :wind_face: has become over the last decade. Most think it is more expensive (and it was, a decade ago!). In large parts of the world its now cheaper to start a solar/wind farm than operate an existing coal station. The economics have changed much faster than anyone expected. Plus, everyone expects solar :sunny: and wind :wind_face: energy to get even cheaper, due to manufacturing, supply chain and technical efficiency.

This creates huge opportunity. Think about the possibilities if we had an abundant supply of very cheap electricity. And investors are starting to see that. Investing into clean energy is breaking new records in the UK and US. Climate tech investment is getting big business. Related industries like transport, electric charging, batteries, mining, metals, energy supply are also being created and growing fast.

In an interview this week, Bill Gates predicted:

“There will be, you know, Microsoft, Google Amazon-type companies that come out of this space.”
“There will be eight Teslas, 10 Teslas. And only one of them is, is well known today.”

:partying_face: (relatedly, I’ve launched an investing-focused email newsletter focusing called Energy Disrupt) :partying_face:

What do you think about my theory? Happy to be critiqued.

Secondly, if you’re with me, what have you invested into? I’m curious. I’ve invested into the Global Clean Energy ETF and a bunch of British and American clean energy companies ($FSLR, £ITM, £UKW, £TRIG, £NESF, $TSLA). They offer great dividends and/or capital growth.

(edit, just added some links to back up some of my points)

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I am currently holding Plug power, probably the best performing hydrogen stock. That has been my winning stock in my portfolio. I also hold FCEL again after selling it earlier this year. The third one is Hyzon motors, a company that builds trucks out of third party parts. Weirdly enough that stock is severely undervalued although they have cars on the road (unlike Nikola for example). The ones that you mention are more traditional energy suppliers, interesting companies but I am betting on hydrogen.

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I bought ITM power in the UK on the back of hydrogen. I agree that’s a very interesting space, I wrote a short piece on that in my latest email. I forgot to add Lucid group to my investments. That’s an EV maker too. Will look into Plug Power and Hyzon too :+1:

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No doubt that Bill Gates and you are right. I’d go as far as to say that climate change is the only real possible extinction level event humanity has faced, so changes will need to happen eventually.

However, most companies in this space will still go bankrupt, so I’d rather go for ETFs or funds. Even normal MSCI world type ETFs will include these good performing stocks and rise accordingly.

If you check how many internet companies there were around 2000 before the tech bubble burst you’ll see that it was almost impossible to pick a winner like Amazon. People have lots of survivorship and hindsight bias about that period.

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The thing with investing is, it’s not about predicting what the future will be. It’s about predicting the future where others have overlooked it, for example buying companies where the growth potential is not already priced in.

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If you scroll down a little he covers Zoom, Amazon & Green energy companies. Basically it’s been a great sector if you invested in the last year but over the last few it’s been torrid. I agree with @AchillesFirstStand it’s not just about picking a winning technology or company but picking one that can fill it’s already priced in growth and then beat it:

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I agree that green energy will be a boom industry for years to come, but with all booms it’s about picking the right shares to back.

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Totally agree with this and in investing terms, the longer your time horizon, the smaller the effects of short-term volatility.

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This is soooo true!!! I just swapped to GEUK (Green energy UK) and it is a better price than non green sources. I was happy to go with a slight increase to go green but pleasantly surprised at the lower cost and the chufty badge at being all green. :+1:

The rest of your comment I agree 100% with! Personally I have invested in loads of small green companies, nearly all I hear of :man_facepalming:, even if just £50, but have larger money in ETFs like Battery clean, clean energy and then ITM, Lucid, Tesla, TRIG, Arrival, Foresight, INRG & Mast.

I can’t help but think the industry has only 1 direction in opportunity and failures will only be down to management mainly. Funding and opportunities will be immense in the next decade.

Clean energy is the future but I am not sure from an investing perspective.

Clean energy is cheap and efficient, therefore long-term profits won’t be as large as the traditional oil and gas companies.

Also, as everyone predicts green energy is the future, I suspect green energy stocks are already overpriced with little growth opportunity. Hopefully I am wrong but we saw a boom in green energy stock prices and now a plateu or decrease.

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I agree with everyone who says its not necessarily about knowing where the future is headed, but picking companies not many know about.

But right now, there’s only one Tesla, and even that may be under-priced (I know what you’re thinking, but I’m writing an article about this to explain my thinking!). There are many more Tesla-like companies to come, not just in energy supply but batteries, EVs, grid-running software, solar panel suppliers etc.

There isn’t an industry out there that doesn’t rely on energy. So this shift will revolutionise everything - in the same way computers and the internet did, IMO.

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I treat clean energy investing as high risk - that’s not stopping me investing in it but it’s important to invest with your eyes open. Clean energy has few rivals for the most lucrative sector over the long term, but the sector and its sub-sectors swing heavily.

You get phases where there’s premature pricing based on expectation of where it will get someday, which is great at the time but then chokes off any prospect of growth for ages because next year’s growth, the year after’s, the year after’s… to be honest were already priced into the initial surge. Then, as that future growth has been choked off and endured by those who bought closer to the high, it reaches something more like FMV taking into account how obviously the sector will grow in the coming couple of years at that point, to (sometimes well-founded, sometimes unfounded) pessimism about the particular company’s ability to survive the course and/or a selloff from those who have decided they’ve had their cream from the sector and are done for now.

If you invest for the long term and diversify enough within the sector, performance should exceed most other sectors. But in the context of clean energy I don’t think 5 or 10 years is a long enough long term to ensure that this statement is factually accurate. I think 15 or 20 years. If you buy towards the end of a plateau and ride a shorter term wave then yes you’ll make better returns a lot faster, but ultimately this is crystal ball gazing. Does the sector being up 5% in a month mean that we’re at the start of another wave? Ultimately if anyone knew the answer to that, it would have spiked by a heck of a lot more than 5%.

Larry Fink, the CEO and Chairman of Blackrock, sees addressing climate change as a massive potential for new businesses.

“It is my belief that the next 1,000 unicorns — companies that have a market valuation over a billion dollars — won’t be a search engine, won’t be a media company, they’ll be businesses developing green hydrogen, green agriculture, green steel and green cement,” Fink said Monday [at the Middle East Green Initiative Summit in Riyadh, Saudi Arabia]

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No sh*t (referring to Larry Fink). If you read Zero to One by Peter Thiel, he talks about this. The next “Google” will not be a search engine and the next “Facebook” won’t be a social media platform, they will be some new types of companies, maybe that we have never even thought of.

With respect to investing, even if the next 1,000 unicorns (or most of them) are green technology companies, that doesn’t mean that just randomly investing in green tech is a good thing. How many green technology companies are there in total, 100,000? So you have a 1 in 100 chance of picking the right one.

I personally do pick individual stocks, but as I said above if everyone thinks that green technology is the future then you are unlikely to have an edge over other investors i.e. over the general market, unless you have some greater knowledge or understanding of the technology than them that allows you to make better picks.

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Photovoltaic and wind farms for electricity production has indeed become cheaper over the years.

Nevertheless, they are still limited for they are intermittent: the Photovoltaic panels only capture the sun’s light during day time and the wind doesn’t blow 24/7/365 at a constant rate.

We are yet to overcome this challenge in a satisfactory and sustainable manner as far as I can understand. But overcome this challenge we must if we want to base our energy on solar and wind. Batteries are improving but they are not there quite yet.

I have been against nuclear since ever. Probably a result of the Chernobyl accident. But recently I have been finding myself looking at nuclear more open minded.

I am under the impression coal is still necessary. Unfortunately, the intermittent character of both wind and solar together with the current inability to store energy sustainably makes for the need of power plants capable of producing energy when needed: coal, gas and nuclear. We all want cheap energy bills. We all want it to be sustainable. We all want it to be clean. Unfortunately, as far as I can understand it, we can’t have it all yet.

I hope battery technology, or other, develops so we can ditch coal and natural gas for good. I don’t know how long it will take. But we are not there yet.

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:arrow_up: This is probably the biggest problem for renewables. While offshore wind could supply all the energy the world needs, there isn’t enough storage or capacitance in any country’s grid to make this energy consistent.