Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



For Energy Startups, Valuation Comes Harder These Days

The way we value energy start-ups will dramatically change in the very near future since there are a host of new ways economic energy disruption can impact capital expenditures (capex) and therefore valuation. One necessary area for meeting corporate needs is connecting with consumers like never before to deliver data and savings. This is something that has driven the recent IPO of OPOWER (NYSE: OPWR  )  to reach over 32 million households already.

Other important new areas of business include sustainability, the social cost of carbon, social media communications, political lobbying, crisis management, meteorology, finance compliance and cybersecurity of critical energy infrastructure. Security in particular is something young energy start-ups and established power players like American Electric Power  (NYSE: AEP  )  and PSEG  (NYSE: PEG  )  feel could become a bigger topic thanks to increased spending to secure the evolving smart grid from hackers. 

Also, with global warming and carbon emissions more prominent than ever in the media, a seismic shift in allocations of capex is likely, dramatically altering the valuation these companies fetch from investors or potential acquirers. That could bode well for young start-ups such as AltaRock EnergyCool PlanetNuScale PowerLightSail EnergyAmbriQBotix and others who are focused on solving issues related to geothermal, nuclear, offshore wind, solar, fuel cells, and battery storage solutions.

Conversations I've had with several funds point to new opportunities to fund start-ups advancing energy solutions that can sustain power disruptions from adverse weather conditions and lead to more efficient energy distribution with lower carbon emissions vs. fossil fuels. That could bode well for young start-ups.

There are always plenty of companies that will promise to save the world with better solutions. Yet with more and more stringent regulations on carbon emissions on the horizon, it could be much harder for energy start-ups to secure capital to commercialize their products, especially since investors may want more ownership stakes for their financial risk.

That makes the role of people at a company even more important. Companies are only as good as their employees. Therefore another economic disruption for energy companies will be the extra money needed to pay, train, and retain more talented workers in a new energy world.

There is too much happening in social media for today's energy start-ups not to pay attention to their external communications presence, including crisis management pre/post natural disasters. So while energy start-ups are focusing on their technology, now they must have people in place to establish and maintain a communications presence in local communities and on platforms such as TwitterFacebook, and Tumblr. 

This new socially connected energy world will require more money to reach more consumers and that will affect much needed capex for many start-ups. It will also likely keep investors interested in OPOWER, a company whose early success may have helped influence Apple to enter home energy management, a point also validated by Google's acquisition of Nest for $3.2 billion. 

Finally, today's energy start-ups also face opposition from those investors against investing in fossil fuels. With that said, I believe the real energy investment alpha for investors will come from Big Tech, not Big Oil. This suggests there will be new fascinating possibilities within energy that were not even considered five years ago.

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven't heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America's greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, "The IRS Is Daring You to Make This Investment Now!," and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3028159, ~/Articles/ArticleHandler.aspx, 9/3/2015 5:45:17 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

John Licata

John Licata is the Founder & Chief Energy Strategist of Blue Phoenix Inc. You can follow John on Twitter @bluephoenixinc

Today's Market

updated Moments ago Sponsored by:
DOW 16,374.76 23.38 0.14%
S&P 500 1,951.13 2.27 0.12%
NASD 4,733.50 -16.48 -0.35%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/3/2015 4:05 PM
AEP $53.35 Up +0.34 +0.64%
American Electric… CAPS Rating: ****
OPWR $8.86 Down -0.16 -1.77%
OPOWER CAPS Rating: No stars
PEG $39.36 Up +0.41 +1.05%
Public Service Ent… CAPS Rating: ****