Guest Contributor: Michael Butler, Chairman and CEO of Cascadia Capital
The rise of natural gas, coupled with the Presidential election and heated debates over energy policy, made 2012 a tumultuous year for this sector. Despite uncertainties of where the market is headed, 2013 will experience an uptick in investment and deals, with emphasis on natural gas, energy efficiency, and smart grid. This year, we predict that natural gas will remain at the core of major energy investment dollars, while activity in the energy efficiency and smart grid sectors will be ongoing, as we continue to experience technological advancements along with the breaking down of barriers. In the coming months, we also believe that the U.S. will move towards a formal, comprehensive energy policy.
Our top four predictions for the energy, environment, and applied technology sectors this year:
IT + Energy Efficiency = Increased Investor Attention While the deployment of energy efficiency software remains far less costly than infrastructure development, investment activity in clean technologies was active throughout 2012, despite the lack of investment in other forms of renewable energy projects. We believe that the ongoing convergence of information technology and green technology will continue to grow in 2013, which will drive ongoing investment, coupled with increased consolidation as clean technology continues to advance.
Natural Gas Will Become the Modern Day Gold Rush Natural gas has been viewed by many as a viable bridge to transitioning the international economy to sustainable energy, and ending our dependence on foreign oil, which has led significant growth in the U.S. With a lower barrier to entry and more cost effective production than its renewable energy alternatives, the natural gas sector has the potential to not only solve our nation’s energy dilemma, but also fuel the job market, creating a significant number of positions in the energy research and development initiatives. As investments accelerate in 2013, Cascadia expects to see natural gas siphon investment dollars away from the renewable energy sectors.
Smart Grid Will Attract Smart Investors Despite substantial investment loses by smart grid investors in recent years, analyst and publishing firm Research and Markets expects that the sector will grow to $57 billion by 2016. New cutting-edge solutions to make the grid smarter are gaining serious traction with utility customers, and because of these solutions, we expect investors to have a renewed focus in the sector, resulting in capital pouring back into smart grid.
Washington Will Tackle Our Nation’s Energy Policy Many remain skeptical about this one, and with a Democratic President and Republican control in the House of Representatives there will undoubtedly be significant debate in 2013 as the hot button issues around energy policy continue to heat up. All eyes will be on President Obama as he tackles issues relating to the future of oil and natural gas production, regulation of carbon emissions, climate change, and support for renewable energy. Still, Cascadia predicts that 2013 will be the year of a comprehensive national energy policy. We expect this policy to extend beyond cap-and-trade to level the playing field for a variety of energy sources and providers, and enable oil and gas to coexist with renewables.
As investor attention gravitates toward natural gas, energy efficiency technology, and smart grid sectors, we can expect to see an influx of strategic investment and M&A activity as Washington makes headway in passing an energy policy in 2013. With the staggering rate of policy adjustments, technological adaptation, and strategic transactions, we expect this to be a dynamic industry over the next several years.
-------------------The co-founder of Cascadia Capital, Michael Butler leads the firm and is an emerging thought leader in the New Energy Economy. He will be participating as a panelist on Clean Edge’s upcoming webinar on Natural Gas and Renewables on March 19. Guest contributor posts represent the personal views of the individual authors and do not necessarily represent the views of Clean Edge.