What do you think of when I say “renewable energy”?
Probably wind. Maybe solar. Maybe hydrogen.
Those are, after all, the three largest renewable energy sources on the planet — and in the midst of a global clean energy revolution, they’ve attracted a lot of hype on Wall Street.
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The First Trust Global Wind Energy ETF (NYSEARCA:FAN) is up 40% over the past year, while the Invesco Solar ETF (NYSEARCA:TAN) is up 140% and Plug Power (NASDAQ:PLUG) — a leader of the hydrogen economy — is up 540%.
But… there’s another, entirely overlooked and ostensibly counterintuitive renewable energy source which could be the next big thing in the clean energy revolution.
Ladies and gentlemen, meet renewable natural gas (or RNG, for short).
RNG is an emerging alternative energy source that — while it does emit CO2 during the combustion process — simultaneously reduces methane emissions because it is sourced from methane-rich animal, industrial, and food waste.
Methane emissions are worst for the environment than CO2 emissions since the former absorbs heat far better. Thus, by increasing CO2 emissions but reducing methane emissions, RNG is net carbon-negative and actually a very helpful tool in combatting climate change.
Of course, the big upside of RNG is economically-rooted: unlike solar, wind, and hydrogen, you don’t need to build out new infrastructure to make RNG work.
It is compatible with existing natural gas infrastructure.
To be sure, though, RNG is not the sole future of clean energy. Hydro, solar, and wind still project as the largest clean energy sources in the future because they are truly zero emissions.
But RNG will factor into the clean energy revolution, for its cost advantages and decarbonizing potential, especially in certain end-markets where zero-emission energy sources simply aren’t cutting it in terms of costs or performance.
One such market? The $800 billion global trucking market, where plug-in electricity solutions are not good enough and hydrogen solutions are too expensive.
Today we will tell you about one small company that is pioneering a disruptive RNG solution in the global trucking market — a journey which could ultimately result in its stock price soaring over the next decade.
Pioneering a Disruptive RNG Solution in a Huge $800 Billion Market
Amid the recent wave of hypergrowth companies going public through SPACs, it’s easy to lose particular names in the shuffle.
But one name you should not lose sight of amid the SPAC boom is Hyliion (NYSE:HYLN).
Hyliion builds electric powertrains for heavy-duty, Class 8 commercial trucks.
Sure, this market is very competitive. But Hyliion has one big advantage over all of its competition: renewable natural gas.
That is, as opposed to running on a plug-in battery like Tesla’s semitruck or a hydrogen fuel cell like Nikola’s proposed commercial truck, Hyliion’s electric powertrains are powered by RNG — the only clean-energy source in the trucking market that is both immediately usable and exceptionally cost-effective.
RNG is immediately useable because it’s a plug-and-play solution with existing natural gas infrastructure, which comprises 729 Class 6-8 refueling stations across North America (versus less than 20 hydrogen and electric Class 6-8 recharging stations, combined).
Meanwhile, it’s exceptionally cost-effective because current RNG prices hover around $1 per diesel gallon equivalent, while hydrogen and electricity prices — though steadily falling — still sit staunchly north of $5.
To that end, RNG will be the face of the clean energy revolution in trucking for the next several years (Deloitte projects that, by 2026, about 80% of all alternative drive systems in heavy duty trucks will be based on natural gas).
Hyliion is positioned with a best-in-breed powertrain platform — dubbed the Hypertruck ERX — that is due to start deliveries in 2021/22.
Just look at the numbers here. The Hypertruck ERX has:
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Driving range of 1,300 miles, ~70% more than Nikola’s hydrogen truck (750 miles) and about 160% more than Tesla’s semi-truck (500 miles).
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A payload capacity of 53,000 pounds, ~10% more than Nikola (48,000 pounds) and ~20% more than Tesla (43,000 pounds).
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A full recharge time of just 10 minutes, the same as Nikola’s hydrogen truck and one-third that of Tesla’s semi-truck.
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A 0-to-60 miles-per-hour pick-up time of 20 seconds, on par with Tesla’s semitruck and 10 seconds shorter than Nikola’s hydrogen truck.
In other words, Hyliion’s Hypertruck ERX is the best clean-energy long-haul truck technology platform in the market… meaning it is ready to lead the clean-energy disruption of the Class 8 trucking market.
This isn’t a small market.
Globally, about 1.7 million heavy-duty commercial vehicles (HCVs) are sold every year. Let’s say this market follows the passenger car electrification arc, and that by 2030, more than 30% of new HCVs sold are built on alternative drive systems.
That implies 500,000 alternative drive HCVs sold in 2030. Hyliion should be able to win ~20% market share with its economic and highly feasible RNG powertrains, implying ~100,000 units sold in 2030.
The company’s internal financials imply average annual revenue per powertrain of over $60,000, while EBITDA margins at scale should rise towards 35%.
Under those assumptions, Hyliion should clear $2 billion in EBITDA in 2030.
High quality truck components suppliers can fetch a 15X EBITDA multiple. That implies a potential future enterprise value for Hyliion of $30+ BILLION… versus a market cap of ~$5 billion today.
So, don’t let this SPAC get lost in the mix… instead, highlight Hyliion stock, put in on your radar, and if you’re bullish on RNG’s critical role in the clean energy revolution, then maybe consider buying the stock today.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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