As traders, we often flip in and out of stocks without ever knowing more than the symbol and maybe the industry that the company is a part of. I’m not saying there’s anything wrong with this approach — I was a high-volume day trader for nearly 20 years, rarely holding any position for longer than a few minutes.
However, we fail to learn about the bigger picture when our only focus is snatching a few dimes or quarters. And for those who invest over a longer timeframe in addition to day trading, ignoring the whole picture can cost you a fortune.
I spent last week at the 2023 Intersolar North America conference in Long Beach, California. While the thought of starring at a bunch of solar panels, lithium batteries and inverters may sound like Dullsville to some of you, a little background on the topic of energy storage systems (ESS) will help you understand why Enphase Energy (ENPH) has skyrocketed from under a buck in mid-2017 to over $200 today, and why shares of SolarEdge Technologies (SEDG) have gained more than 2,000% over the past six years.
Without getting too deep into the weeds, solar panels won’t do you much good at night. But if you can store the energy your panels collect during the day and use that energy at night when power is typically the most expensive, you can save a bundle. This is where an energy storage system comes into play.
If you live in California, you already know that duck tape holds the grid together. Combine the unreliability of the California electric grid with the sky-high cost of electricity between 4 pm and 9 pm, especially during summer, and you can understand why there’s a mad rush among California residents to pair new or existing solar with an energy storage system.
An ESS isn’t something I currently need, sitting in my home in Utah that has lost electricity just two or three times in 15 years. But for folks living in states that are highly susceptible to wildfires, hurricanes and brownouts, reliable energy is a luxury they’re often forced to live without. Securing one’s energy needs in a state such as California, which is constantly encountering grid challenges, has helped catapult Enphase into a $28 billion market-cap company.
From an investment angle, the 2023 Intersolar conference revealed several companies nipping at the heels of companies such as Enphase and SolarEdge. While these multibillion-dollar industry leaders would no doubt debate my opinion, I left the conference realizing that ENPH became the leader in inverter technology based not on its technological superiority but on its speed to market. Simply put, after spending nearly a week chatting with countless private companies, some of which are raising money to fund their growth initiatives, I am wildly bullish on the prospects of the ESS market but decidedly less so on Enphase and SolarEdge over a multi-year period.
For those curious about the Tesla (TSLA) Powerwall, here’s what you need to know. If you want to power a couple plugs, a TV and your refrigerator, a Powerwall should cover you. However, if you’re going to power your entire 4,000-square-foot home, a poo, and cold start all your appliances and your air conditioner, you better be prepared to install as many as five or six Powerwalls. As you dig deeper into ESS, you soon realize that companies don’t all define the “whole home energy storage system” the same.
While no one is going to invest in TSLA for its exposure to the ESS market, I believe the Powerwall product will go the way of the dodo bird within a few years, or that Tesla will be forced to improve its inverter technology massively and/or purchase one of the leading competitors I spoke with in Long Beach last week.