The Trade of 2021 — Second Order Effects of Energy Market Disruption

In today’s Money Morning…2021 could be YOUR year…‘it would have seemed ridiculous 10 years ago…’…rats jump ship…and more…

There’s a global revolution happening.

It’s in clean energy.

And I believe that 2021 is THE year.

If you’re a speculator by nature, 2021 could be YOUR year.

You might think the current clean energy revolution sweeping the planet started at the beginning of 2020.

It’s genesis, however, was in 1954.

That year Bell Laboratories whipped the curtain away on a new invention they’d been working on for years.

The world’s first photovoltaic cell.

They called it a ‘solar battery’.

It was unveiled not with fanfare, but with some endearingly quaint advertisements.

The same kindly rays that help the flowers and the grains and the fruits to grow, also send us almost limitless power.

But, as Bloomberg points out, ‘The early marketing also contained a strong dose of realism: “There’s still much to be done before the battery’s possibilities in telephony and for other uses are fully developed.”

Much to be done, indeed. Photovoltaics were wildly expensive, complex to produce, and tiny. There wasn’t even a commercial application for them until 1962 with the Telstar 1, the ‘first privately sponsored space-mission” and the first satellite to relay a transatlantic television signal. Now solar power is standard on satellites.

Over the decades, solar found more uses.

Powering everything from the calculator in your pocket to weather stations to homes.

But it was never cheap.

Not until now…

The earliest data Bloomberg has on solar shows panels cost more than US$100 per watt in 1976.

Today?

In 2020 one panel costs 23 US cents per watt.

That’s a 99.3% decrease.

‘It would have seemed ridiculous 10 years ago…’

Bloomberg continues (emphasis added):

Today’s panels are also much better than what came before: more efficient, more reliable, more durable, and lighter-weight. I could heft a solar panel on my own if I wanted to…

This is bigger than the market havoc of the pandemic. It’s just the beginning, really, of an energy world with more and more moments of being better than too cheap to meter.

People will get paid to charge. Services will crop up, on-demand, to use free or negatively-priced electricity. Fleets of electrolyzers will use renewable electrons to produce hydrogen and help reduce emissions in steel, cement, and glass production that are right now a tremendous environmental challenge.

And that’s the revolution. It would have seemed ridiculous even 10 years ago, much less 50, and yet here we are.

That’s right, reader.

As we ring in the New Year, here we are

Rats jump ship

We now find ourselves in a strange new energy world.

Rumour has it a string of top Shell execs are jumping ship.

They’re not happy with the pace at which the fossil fuel major is adapting to the revolution that’s happened over the last 12 months.

As Recharge reports:

The Financial Times identified three senior executives involved in Shell’s various clean energy operations who have all left the company in recent weeks, and cited sources saying others are expected to leave the group in the coming months.

The newspaper quoted sources close to the matter suggesting the main reason for the departures was that those involved wanted to see more decisive moves away from fossil operations.

One was quoted saying: “People are really questioning if there will be any change at all.

‘“Part of the frustration is that you see the potential, but the mindset isn’t there among senior leaders for anything radical.”

Recharge understands that solar, storage and onshore wind head Marc van Gerven, Eric Bradley of Shell’s distributed energy division, and Katherine Dixon, VP strategy, energy transition, have all left their roles.

Like I keep saying, this disruption in global energy is happening at lightning pace.

I’ve no hesitation in saying now, on the final day of the year, that I believe it will be THE trade of 2020.

The trick going forward is to anticipate deliberately and in advance which stocks might benefit from this phenomenon next.

For instance…

  • How the global green pivot reshapes and disrupts the Aussie mining sector…which small-caps already have a platform…and which might get killed off by the displacement of coal over the next few years?
  • The rare element resurgence…there’s a strange second-order effect already in play here, where China is self-sabotaging its own market dominance of critical battery elements like neodymium, praseodymium, and dysprosium. Which Aussie companies are about to jump in?
  • Side industries set to burst into existence out of nowhere…one second-order effect is shaping up to be a new $20 billion industry within four years. And we’ve just tagged a small Australian play as a potential leader…
  • Energy’s great pantomime villain steps from the shadows…whether a Green Nuclear Deal materialises under Biden or not…you can expect a major resurgence here in the coming years. As the IEA says: ‘Without nuclear power, the world’s climate challenge will get a whole lot harder.’ There will be second-order effects on uranium supply chains…and one Australian company is already getting a major foothold…
  • The future Facebooks, Amazons, and Googles of the low-emissions world…the REAL gains from the internet disruption were banked AFTER what we now call the ‘dotcom boom’. When the second-order effects started coming into play.

Facebook produced an annualised return of 36% between 2012 and 2016. Amazon 37.4% between 1997 and 2016. And owning Google between 2004 and 2016 got you a 25% annual return.

These were all internet second-order effect stocks. Are there similar speculative stocks, trading right now in obscurity, that could become world dominators by the 2030s?

The idea is to do your best to foresee, measure, and put a dollar value on potential second-order consequences. And give yourself the best possible chance to make money from them.

You’ll find some answers in that regard here.

Best wishes and happy New Year!

Regards,

Lachlann Tierney Signature

Lachlann Tierney,
For Money Morning

Lachlann is also the Editorial Analyst at Exponential Stock Investor, a stock tipping newsletter that hunts for promising small-cap stocks. For information on how to subscribe and see what Lachy’s telling subscribers right now, please click here.


Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:


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