overview
Many would have read about what recently happened in the Texas major freeze. We have a close friend who lives in Texas, and he shared his story with us. It was not the worst I’d heard, but hearing it from the horse’s mouth and someone we know personally made it all the more surreal and our hearts really go out to those that have suffered tremendously during this difficult period.
Since the major freeze happened, our friend who lives out on a farm about an hour’s drive from Houston literally lost power from the grid and water supply in his house for 4 days. Temperatures went as low as -12 DegC where he lived, and when he tried to run his water, his pipes burst. He is not alone in this – apparently millions of gallons of water have leaked from burst water pipes in just one Texas city. Showers couldn’t be taken, and toilets couldn’t be flushed for days. Thankfully, just before the cold spell arrived, he had managed to stock up on shelf loads of bottled water and packet food. For once, our friend was glad he had hoarded basic necessities, or he and his family may not have survived (please know his wife has a heart complication). He said living off a farm meant he’s always had to think about survival, and another thing he was grateful for was the backup diesel generator he recently installed. While it didn’t power up all electrical devices like his router, at least certain critical appliances like refrigerators and lights could work. While he certainly didn’t get it the worst, he told us it did feel like he was back in medieval times.
Things are getting better now with the ice thawing and like him, many Texians are scrambling to get their lives back in order again.
The main point about this article is to highlight to our community that there are going to be profound changes in the USA. The Texas incident will accelerate many technological advancements already happening. Many people have begun to question why and how Texas could have been so unprepared, and to have let this happen. As investigations into root causes start to evolve into recommendations on the best way forward, we will begin to see real changes driven from the bottom up.
TAKEAWAY
- The Texas deep freeze incident will accelerate many technological advancements already happening.
- As investigations into root causes start to evolve into recommendations on the best way forward, we will begin to see real changes driven from the bottom up.
- Find out what we think are possible short, medium and long term investment opportunities.
- We believe the world is now going to usher in a new world of Energy from the people. The traditional reliance on government, states and utilities companies to supply us with the energy we need will gradually diminish with time. We’ve been used to paying for hydrocarbon and coal for our power needs. That will also change.
- In the new world order, we at AlgoMerchant believe technology has come of age for us to harness the power of solar and other renewables. Electric vehicles should not be the main focus. The focus will eventually be on the ‘GRID’.
- The whole energy transition that has been taking place with renewables, will ultimately become a grid. What that means is that the future of the electrical grid will power cars, homes, buildings and everything we interact with as individuals will have both the ability to consume and sell electricity back to the grid.
Immediate opportunities
As Texians begin their path to recovery to find investable opportunities, we need to identify the key issues before finding potential companies that will likely stand to benefit from helping Texians solve these problems. We can definitely expect government policies to change, especially with Biden (a staunch believer of climate change) at the helm. While these issues have solely affected Texas, it may very well affect other States in the future. These policy changes will prioritize electric grid reliability, robustness of water systems, and climate resilience.
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Residential Generators – Many Texians are now realising they will probably need to take matters into their own hands to safeguard their own survivability instead of being reliant on the State. An immediate implementation may be to install backup generators into their own homes. Companies like Generac Holdings Inc (NYSE: GNRC) with one business segment being residential generators will likely stand to benefit from more residential sales in coming quarters. Another small cap player Pioneer Power Solutions Inc (NASDAQ:PPSI) could also benefit from a surge of generator-related sales. Its Critical Power division sells generators, transfer switches and uninterruptible power supplies.
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Power Grid Resilience – Eaton Corporation plc (ETN) derives approximately 40% of sales from electrical components, such as transformers, power systems and circuit breakers. CEO Craig Arnold said this in December “If you think about the future of the electrical grid, everything that we interact with will have the ability to both consume and sell electricity back to the grid”.
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Water Pipe Solutions – Uponor Oyj (HEX: UPONOR) provides plumbing, indoor climate, and infrastructure solutions in Europe and North America. One of its key products, the PEX pipe, is synthetic that is more flexible than PVC or copper and is more resilient to extreme weather.
Medium Term Opportunities
Solarfication by home owners will happen over time, especially when the cost of solar panels, installation, and maintenance decreases while efficiency improves.
Solar companies are already very popular and well-known, hence the focus will not be providing a list of popular solar companies. Instead, we would like to focus on a lesser known and appreciated medium-term opportunity, which is home battery storage. For the future of energy and power consumption to be reliable and sustainable, a steady and reliable source of energy generation and transmission is essential.
With solar energy, one can only imagine that this is hardly consistent and reliable, especially when the climate is becoming more erratic. Hence, the future of energy from the grid will likely be a mix from a variety of sources.
From a home owner’s perspective, it is almost inevitable for home battery storage to be an essential fixture that buffers varying energy demands across time and having to interact with the grid. Furthermore, it is also envisaged that home owners will strive towards energy independence, and being able to survive offline, outside the grid. We believe the Texas incident will accelerate this phenomenon in the near to mid term future.
Would you be surprised if we told you TESLA does just that? TESLA bought over Solar City many years ago and with that acquisition, was given the technology to develop and commercialise their proprietary home battery storage solution called PowerWall.
Another listed company in this space is Solar Edge Technologies Inc (NASDAQ: SEDG).
Long Term Opportunities
We believe the world is now going to usher in a new world of Energy from the people. The traditional reliance on government, states and utilities companies to supply us with the energy we need will gradually diminish with time. We have been used to paying for hydrocarbon and coal for our power needs. That will also change.
In the new world order, we at AlgoMerchant believe technology has come of age for humans to harness the power of solar and other renewables. Electric vehicles should not be the main focus. The focus will eventually be on the ‘GRID’.
The whole energy transition that has been taking place with renewables, will ultimately become a grid. What that means is that the future of the electrical grid will power cars, homes, buildings and everything we interact with as individuals will have both the ability to consume and sell electricity back to the grid.
Vehicle-to-grid (V2G): A system in which plug-in electric vehicles can communicate with the power grid to sell demand response services by either returning electricity to the grid or by throttling their charging rate. V2G storage capabilities can enable EVs to store and discharge electricity generated from renewable energy sources such as solar and wind, with output that fluctuates depending on weather and time of day. An upcoming company “Nuvve” with V2G technology capabilities is expected to be listed via a SPAC holding company Newborn Acquisition Corp (NASDAQ: NBAC).
Small Medium Reactors (SMR): As mentioned above, it is likely the future of energy is one of portfolio mix. Bill Gates is particularly bullish on Nuclear, and the upcoming SMR nuclear reactor technology is very much safer and overcomes the stigma related to traditional nuclear designs that caused the Chernobyl and Fukushima incidents. Unfortunately, there are currently few listed companies in this area of SMR technology apart from the Uranium commodity itself.
Conclusion
As an innovative fintech startup company, AlgoMerchant is at the forefront of technological disruption. This also allows us to be acutely aware of major disruptions that are occurring outside of the trading sphere.
We hope our articles will enable our community readers to be attuned to the rapid changes in the world, and also take a more proactive stance in identifying shifting tectonic changes early.
In this article, we have highlighted several opportunities (for educational purposes) due to the Texas Freeze incident, but the more important message is how it will likely accelerate the changes in the energy industry, just like how Covid-19 has impacted our everyday lives.
Lastly, do feel free to check out our TradersGPS system to find out how it is an enabler for our subscribers to find entry points for stocks of interest, even if they may already be in the midst of a bullish uptrend!
