With the administration of President Joe Biden underway, one of its top priorities is introducing a comprehensive clean energy policy. During the campaign, Biden pledged to get the U.S. on track to be net emissions free by 2050. On the surface, this bodes well for Star Peak Energy (NYSE:STPK) stock.
Star Peak Energy is a special purpose acquisition company that will merge with Stem, Inc., a battery-storage management firm. Indeed, STPK stock is one SPAC I can truly get behind.
For starters, yes, the political landscape provides an obvious catalyst for an investment like STPK stock. That’s because battery storage and its efficient distribution will be critical to comprehensively and effectively integrate renewable energy solutions. The unfortunate rolling blackouts in California last summer provided a perfect case study of why storage cannot be taken out of the green energy equation.
While the issue has become politicized among some Washington elitists, the reality is that it’s a scientific issue. Renewable energy sources like wind and solar are intermittent. Not only that, but variable weather conditions can also negatively impact these platforms, even during the times of day when they could be accruing “free” energy.
According to the Wall Street Journal, unexpected disruptions in renewable energy channels led to an acute condition:
Investigations are under way to determine what went wrong and why, but it appears that resources that were expected to provide electricity failed to come through in some cases. One gas-fired power plant tripped and haze and low wind speeds crimped the contributions of some solar and wind farms.
It’s a chronic problem that explains “why California finds itself scrounging for megawatts on many evenings.” Perhaps no one company will change everything. However, the underlying business of STPK stock – battery storage and the efficient distribution of energy during peak hours and downturns via artificial intelligence – will be pivotal in making green energy green in other ways.
Compelling Upside for STPK Stock
Though Stem has the potential to spark a rethink in laggard energy infrastructures of California and other states/regions, the beauty of STPK stock is that this is an investment with myriad use cases.
A prime example is Dignity Health Sports Park, one of Stem’s clients. Located at California State University-Dominguez Hills, Dignity Health Sports Park isn’t what you call a life-or-death business. However, people pay good money to attend sporting and entertainment events hosted there. The last thing this operator needs is a power failure, which can be detrimental in both the near term and longer term due to reputational damage.
With its partnership with Stem, the stadium has access to a battery storage network, which may act as a failsafe in case of a disruptive event. Further, it can purchase electricity when it’s cheaper, avoiding the premium of peak hours, which can sometimes be 10x more expensive than earlier in the same day.
But what really makes STPK stock stand out is its AI platform, Athena. While battery storage is critical, that’s just one component of the bigger picture. You also need to purchase and distribute energy in the most efficient manner possible to maximize the value of storage networks. For instance, guessing peak usage incorrectly could end up eating unnecessary energy costs.
However, the problem with attempting to forecast usage involves multiple variables, such as weather, temperature, and demand seasonality, among other dynamic datapoints. It can be overwhelming for a human operator. But with Athena, Stem can automatically analyze multiple data sets, driving much more accurate forecasts for the company’s clients.
In other words, Stem can address the catastrophic issues such as the California rolling blackouts, keeping its clients powered through disruptive incidents. However, the business goes beyond mitigating the negatives: it’s about driving value in the normal day-to-day operations.
The Practicality Is Evident
Although I appreciate the general push toward clean energy and addressing climate change, a feel-good narrative alone isn’t going to impart broader, lasting changes. What I mean is, the bottom line is the bottom line.
Sure, research indicates that consumers will pay more for sustainable products. But when you get down to the brass tacks, we’re talking about a modest increase like 5%. That has been one of my issues with electric vehicles. When you compare apples-to-apples in terms of features, internal combustion currently beats out EVs handily.
Basically, you can expect most Americans to pay an extra 5% to save the environment. But 50%? You’re dreaming, no matter how much virtue signaling you virtuously signal.
That’s the other big picture concept of STPK stock that appeals to me – it’s practical. The company isn’t just saying we’re going to protect you if clean energy solutions don’t measure up. Instead, it’s showing that this new rethink is demonstrably superior to the old way of doing things.
Finally, we can have our environmental cake and eat it too.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
