The COP21 United Nations climate summit in Paris recently came to a close, and for once, there was a broad agreement on greenhouse gas reductions. As a result, 195 countries agreed to take action and report their progress every five years to the group.
Each country will tackle emissions differently, and the pace of change will vary. But this international agreement adds a tailwind for clean sources of energy and new technologies that could change our energy future as we know it. Here are five companies that should be big beneficiaries from the agreement in Paris.
If countries like Saudi Arabia, India, and China become leaders in renewable energy -- as they have talked about -- this climate deal could be a big win for First Solar (NASDAQ:FSLR). The company is one of the industry leaders in large-scale solar projects, and its improving technology is perfect for harsh climates (deserts, and locations near the saltwater of the ocean).
Expanded demand for solar energy, in general, would be good for First Solar, and its competitive advantages in technology and financial stability should make it an attractive partner in emerging markets. Look for major project wins in some of the countries most involved in the climate talks as growth opportunities for First Solar long term.
Like First Solar, SunPower (NASDAQ:SPWR) builds large-scale solar plants around the world. But its high-efficiency panels are also well suited for smaller installations like residential rooftops. As a result, it will be able to grow off a growing desire for clean energy -- but in even more markets than First Solar.
The company's new P-Series panel also will be a low-cost option that will be well suited for non-OECD emerging markets, where capital costs are higher than in developed countries. This will give SunPower exposure to nearly every segment of the solar market, and a one-stop shop for those looking to go solar.
According to the U.S. Environmental Protection Agency, transportation accounts for 27% of greenhouse gas emissions, so any major plan to impact climate change would likely include auto emissions. That plays right into Tesla Motors' (NASDAQ:TSLA) hands.
Electric vehicles are now becoming mainstream, and Tesla Motors' plans to sell 500,000 EVs per year by 2020 could get a boost from emissions standards. This boost may take the form of further tax subsidies, cap and trade, selling carbon credits, or another scheme to promote clean-powered vehicles.
The other tailwind Tesla Motors has is energy storage, which is needed as renewable energy becomes a larger percentage of the grid. Energy storage smooths out the peaks and valleys of electricity coming from renewable plants, and helps the grid operate more efficiently. This will be a big business for everything from home energy storage to utility scale storage.
One of the surprising beneficiaries from the climate talks may be General Electric (NYSE:GE). The company's wind turbines will likely see more demand, and its energy storage business will likely grow; but I think we'll also see greater demand for natural-gas-power plants, and next-generation energy services.
GE has been investing heavily in products to serve what it calls the industrial Internet, and that's where the company's biggest benefit may be. The industrial Internet is made up of products that communicate with each other to diagnose where a plant or train could run more efficiently, or the backbone of a smart home or business that reduces electricity demand when prices are high. A decade from now, I wouldn't be surprised to see GE being an integrated part of a lot of the energy products we buy, even if consumers don't even know it.
Wait... Apple (NASDAQ:AAPL) isn't an energy company, is it? Apple's role in the future of energy isn't in building renewable-energy plants or technology that makes a car more efficient; Apple's role is building a platform that these new technologies can work on.
Before Apple developed an ecosystem of products, if you wanted to install a home automation system, you needed one or more custom controllers, and products had to be wired into the house. Even after that was done, the system was obsolete in a few years. Now, innovative energy companies can build products that use iPhones or iPads as controllers, and even tap into Apple's HomeKit. It's an all-in-one controller that makes energy products easier to use.
Five or 10 years from now, your home will know when you're going to be home, you're preferred home temperature, whether you accidentally left the lights on, and when to start the dishwasher to get the lowest-cost energy. These types of innovations will make the country more efficient in energy use, and Apple will be at the center of it.
An energy revolution is here
The agreement in Paris isn't the driver of energy innovations, but it helps assure companies and investors that there's a broad desire to develop energy solutions that also tackle emissions. It will take years for the full effect of this deal to take hold, but when it does, I think these five companies will get a major boost from growing demand around the world.