In today’s Money Morning…this time it’s different…expect the unexpected…the beginning of a renewables revolution…and more…
2020 has been a fascinating year for energy.
After all, who would have expected that a pandemic would be the catalyst to finally see renewables take centre stage. But, that is precisely what we are seeing…
From the oil price collapse in April, to the lithium and battery metal bounce back — energy markets are changing. Bringing the greener future we’ve long heard about into the present.
We’re even seeing Australian states embrace this change.
Both Victoria and NSW have committed to some form of renewables investment, for example.
Victoria’s recent budget has set aside $550 million for six ‘renewable hubs’ across the state. While NSW passed laws last Friday committing to build 12 gigawatts of clean energy solutions.
Meanwhile, Tasmania declared last week that it is now 100% powered by renewables. With wind and hydroelectricity providing all of their electricity.
So, no matter how any of us may feel about renewables, we can’t deny their growing importance.
After years (decades even) of talk, we are finally at the turning point it seems. Potentially displacing fossil fuels from global energy markets. Or at the very least, they are beginning to…
This time it’s different
Now for investors, this anticipated renewable energy boom will likely mean a few things.
First of all, it doesn’t mean that all fossil fuels or the companies behind them will up and disappear overnight. Far from it. Much of the developing world will likely still be reliant on oil and gas for some time.
Nor does it mean that investments in renewable resources will necessarily be the best option. With the price of metals such as lithium refusing to budge in the face of a supply glut.
Granted, that hasn’t stopped lithium miners from doing very well in 2020. As can be seen in the charts of Galaxy Resources Ltd [ASX:GXY] and Pilbara Minerals Ltd [ASX:PLS]:
Source: Google Finance
Both stocks have doubled in share price since the start of the year. Underpinning the resurgence in lithium interest and demand.
And with some forecasters — such as Citi — anticipating glut to turn to shortage next year, further gains may be on the table. An outcome that could spark yet another surge in interest for lithium miners.
It certainly may pan out that way.
But, it isn’t where I would be focusing my attention as an investor. At least, not at the moment.
After all, this is just a repeat of what we’ve seen before. A market that has already seen and had its heyday. Not that that doesn’t mean there are more gains potentially to be made — I just wouldn’t expect the explosive returns of the past.
Instead, to give yourself the chance to truly profit from this renewable takeover, I believe you need to look elsewhere. Looking beyond just the surface level winners — digging for further opportunities.
Which is precisely what my colleagues Ryan Dinse and Lachlann Tierney have done!
They have cast their attention to this sector for some time. Delving into areas that most investors don’t even realise they could profit from. Looking beyond the immediate commodities narrative and delving into far more fascinating areas.
They’re calling them ‘second-order effects’.
Expect the unexpected
When it comes to innovation, there are almost always second-order effects.
The kind of unforeseeable outcomes that end up having dramatic impacts. Sometimes even more so than the expected results.
To give you a well-known example, just look at GPS.
This technology was developed within and for the US military. A system that was borne from the Cold War era and perfected by the Space Race.
By using satellites, the US had a navigational advantage over its enemies. Able to track, pinpoint, and locate whoever or whatever they wanted. The ultimate weapon in information warfare at the time.
Nowadays though, GPS is perhaps more synonymous with Google Maps than warfare. An unexpected consequence that has changed all of our lives for the better. Providing far more value as a societal tool for everyday navigation than any tool for war.
When GPS was first conceived though, this most certainly wasn’t what the inventors had in mind.
This is what I mean by second-order effects.
And when it comes to renewables, we could be on the verge of seeing a frenzy of similar outcomes. Unexpected or underappreciated innovations that are being ignored by the mainstream.
The kind of innovations that could net early investors incredible returns. Several of which Ryan and Lachy have already pinpointed and are following.
I won’t spoil it for you though.
Instead, if you have any interest in renewables — or possibly the most important investment industry of the year — then I urge you to read their report in full. Seriously, you’ll unlikely find this story anywhere else.
Check it out for yourself, right here.
Of course, nothing is certain, but if they are even half right, the ramifications will be huge. A turning point that won’t just signal a new era for renewable energy, but perhaps the beginning of a renewable revolution. Beyond even the scope of what many may imagine.
Like I said, 2020 has been a fascinating year for energy.
But what may be coming next, could see us reach an even greater order of magnitude.
Editor, Money Morning