I spent last week bouncing up and down the West Coast for a roadshow of a company in which I’m invested. While many of us are fretting over the next interest rate hike, unemployment report or Consumer Price Index (CPI) numbers, high-net-worth investors and the family office network remain hyper-focused on finding the next great opportunity.
Over five days I met with dozens of sophisticated investors. Everyone attending the various meetings knew where rates and key economic indicators sat, but most folks wanted to discuss new investment opportunities. With a few exceptions, no one was anxious to discuss the hypothetical direction of interest rates or the ever-changing inflation expectations.
A surprising number of family offices were focused on private equity. Many wanted to learn more about Regulation Crowdfunding and Regulation A+ once they realized I was active in that arena. On the public side, there was significant interest in oil and gas, lithium (production and exploration) and energy storage solutions (battery storage for solar).
I’ll touch on the oil, gas and lithium industries later this week. On the battery storage side, the fact that I was in California clearly contributed to investor interest in the energy storage space.
If you live in California, I don’t need to tell you about net energy metering (NEM) 3.0. But for those who don’t live on the West Coast, California passed NEM 3.0 in late December 2022. Beginning on April 15, 2023, the new net metering policy will cut the value of solar energy credits by about 75% for many electric utility customers in the state.
Simply put, after mid-April 2023, there won’t be much of a return on investment for new solar projects without the addition of a battery storage system.
While California residents still can sell their spare energy back to the grid under NEM 3.0, the only time you’ll receive a substantial payback is between approximately 4 pm and 9 pm, when energy use is at its peak. To sell your energy back after the sun has gone down, you’ll need to have stored it throughout the day on an energy storage system.
The two investment themes surrounding NEM 3.0 and energy storage systems are lithium because of the massive number of batteries a whole home system requires and the companies that manufacture the battery storage systems.
I’ll save the discussion on lithium for another day, but on the energy storage side, the most relevant name on a major exchange is Enphase Energy (ENPH) . But if my time at the Intersolar Conference in Long Beach, California, in early February taught me anything, Enphase has some seriously impressive competition nipping at its heels. And while I love the battery storage market, Enphase is far from reasonably priced and not a name I’m interested in investing in for the long term.
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