In what areas of the Energy Industry are there opportunities for innovation?
The energy industry finds innovation essential to improving efficient energy production and meeting the demands for clean energy. Scientists and engineers are currently developing new technology that will help produce natural gas. New unconventional gas sources in North America are being exploited through innovative drilling techniques such as hydraulic fracturing, also known as “fracking” (1). Companies familiar with the American energy landscape will have the upper hand in using innovation for exploring new sources of energy. Whereas Chevron and ExxonMobil may benefit from the boost of energy findings in North America, a company like PetroChina may not reap such profits. As clean-burning fuel that does less damage to the atmosphere, natural gas creates the potential for innovation in the energy industry. Companies with strong financial bottom lines will be better positioned to invest in the engineering necessary to utilize clean energy such as unconventional natural gas.
The opportunity for innovation in the energy industry is becoming more significant than ever before. According to Dan Yergin, Chairman of Cambridge Energy Research Associates, “an intensified drive for innovation will be required for the world to meet its energy challenge” (2). The world’s energy sources, particularly oil and natural gas, have become more expensive and more toxic for the atmosphere. The companies that can create energy that is affordable, clean, and sustainable will be likely to experience future growth. One company taking advantage of the global market for clean energy is First Solar Inc. According to Zacks Equity Research on YahooFinance.com, First Solar is developing new cells that will convert a higher rate of solar power to electricity than ever before (3). Innovative breakthroughs like converting solar energy to electricity is transforming the energy landscape. The market for innovative technology is there for firms to partake it. Those who can innovate most successfully will likely be the strongest investment recommendation.
Resources:
"Companies with strong financial bottom lines will be better positioned to invest in the engineering necessary to utilize clean energy such as unconventional natural gas"
ReplyDelete-- This goes along perfectly with the unofficial rule: "If a project fails, let it fail quickly." The funds necessary to explore new technologies are large in all companies, the only difference is the repercussions can be easily diluted in such large companies like the ones you listed. A failure won't be drawn out, instead just a minor set back. Good Info Thomson.
I agree with both Dan and Thomson, we need to look for companies who have strong backings in order to make a good investment. That way, even if a company has a slip-up with a product or method, they will be able to bounce back quickly without depreciating their stock value/revenue growth completely and therefore our long term investment would get back on track. In my blog I mentioned that the companies with the largest revenue growth rate aren't necessarily the best investments due to this reason, so as we continue the path on choosing the right companies in our investment, I think the growth factors you mentioned paired with a stable company with experience will be the way to go.
ReplyDeleteLela - that's exactly why I have big on Chevron lately. Their financial backings are very strong compared to the industry and this will let them explore new types of energy sources. Chevron is one of the most efficient energy companies in terms of equity and assets, they also have strong profit margins and current ratios. These strong financial characteristics are what make Chevron a great investment because they have stability going forward and haven proven to be successful in the past in exploring for innovation.
ReplyDelete