tesla rig

Living in Northern Texas after Southern California is like landing on Mars after Earth. Never-ending flatness of countless fields. Trucks. Plazas. Heat.

With its 300 days of summer I thought Texas would lead the movement of utilization of solar power. But Lone Star State is only 10th in the US.

Texas is big on wind though. First place. But it’s really windy only in spring and early summer. Why not make use of solar energy during fall and winter?

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California possesses more than half of all solar power equipment in the United States. Same goes for electric cars and technology startups.

People in these 2 states are very different. Lives are different too. Cali is laid-back and ambitious like a college graduate. Texas is traditional and stable like a “serious man” from classic novels. And even though energy sector (which includes oil & gas) is usually b2b, in reality it depends on individual consumers who live in different states of our enormous country.

Classic approach won’t work from now on.

Oil will never cost $100/barrel again. We live in a new reality. Monster companies like BP, Exxon Mobil, Chevron will have to adapt too. Look at how much cheap oil impacted Exxon’s stock positions last year.

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But it’s climbing back up again. And one of the 2 fundamental factors supporting this growth are:

Traditional states (like Texas) depend on heavy equipment that runs on fossil fuels like coal, oil, gas. Consumers keep buying trucks (F-150 and Silverado have never felt better) burning millions of gallons of petrol every week. Because it’s the way people live here.
Exxon Mobil, like many other energy companies, is shifting its approach to become a more flexible startup-ish company (see below).

Energy market is the new Silicon Valley.

There are 3 things distinguishing Bay Area’s successful startups from competition:

— They make money.

— They acquire vs build

— They really reward employees

We find these same principles adopted by big energy players today.

Exxon Mobil is acquiring InterOil for around $2.5B.

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Hilcorp rewarded each one of their 1381 employees with astronomical (for corporate America) bonuses of $100K for hitting growth goals in 2015.

IWP will buy any petroleum exploration company with moderate growth. As well as land leases.

As well as oil & gas production.

And these companies are always looking for new technologies.

Software vs Hardware.

Energy sector companies don’t feel like investing into long-term hardware projects any more. This is one of the reasons why solar is not being picked up in a 300-sunny-day Texas btw. Because building a solar power field capable of supplying 40,000 homes with electricity will cost unreasonable amount of investor’s money. Plus, there’s no guarantee that all 40,000 homeowners will switch to solar overnight.

Instead, for a fraction of those hypothetical solar field investments successful energy companies can build or acquire state-of-the-art technologies that will help them find and design stable wells or provide better security tools to eliminate on-site lethal accidents. And remember, all necessary hardware is already in place (like oil rigs and productions plants) and billions of dollars have been spent.

Here’s what IWP’s chairman is saying about their approach.

Green energy.

Like I said, this trend is very popular in California and New York. But everything in between LA and the Big Apple will keep investing big dollars into traditional fuels adopting startup flexibility.

It looks like green energy companies like PVComplete that simplifies design of solar panel installation, or Urban Future Lab incubator for green energy startups will have to shift their focus from corporations to actual consumers.

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Because energy sector is one of the most lobbied sectors of our economy and no “green power” money (sorry Elon Musk) will be able to disrupt this status quo for a long long time.

Path of least resistance.

And on top of a very challenging corporate climate, green energy will have to combat the most merciless factor that has ever existed — people and their established lives.

Those saying that traditional oil and gas industry will inevitably fall before solar are profoundly wrong. Let me explain.

My favorite entrepreneur Mark Cuban described why on-demand TV will never supplant good old cable (he also explained it in his book).

The idea is very simple — all people are passive by default and will choose the path of least resistance every time.

Another great sales book by Jill Konrath says: bring value to the table without disrupting the status quo of the decision maker and you’ll be golden.

Majority of people will never be able to think about their lives strategically. Seeing actual savings from cheaper solar energy in a 10-year perspective is a tough task for someone whose credit cards are maxed out every month.

So when people think that solar power companies will kill classic energy businesses they ignore the obvious. To make it happen actual consumers (homeowners) need to change the way they’re getting their energy today.

And because building solar fields is way too expensive with no consumer demand guarantee. And because people will choose the path of least resistance (to keep getting energy the traditional way), I have to conclude that solar taking over [oil + gas + wind + coal + water] will take decades and traditional energy sector will keep prospering.

Now load up your trucks and hit the road. We’ve got some fuel to burn.

July 2016. Plano, TX.

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tesla rig

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Living in Northern Texas after Southern California is like landing on Mars after Earth. Never-ending flatness of countless fields. Trucks. Plazas. Heat. With its 300 days of summer I thought Texas would lead the movement of utilization of solar power. But Lone Star State is only 10th in the US. Texas is big on wind […]

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