Season 5, Post 32: Staying cool and getting greener
Your author is just back from his second week away from the office this summer. His two vacations were spent hiking in Switzerland and relaxing on the UK’s South Coast. While not necessarily the most glamorous or obvious of locations for many readers, in neither instance was there a risk of extreme temperatures or wildfires, problems which have beset much of Europe this year. Record temperatures should scare everyone. They are a function of global warming, and we may have to live with them for some time. The good news is that investment in renewable energy projects is growing. These can help mitigate some of the negative impacts of climate change.
A round-up of recent news that readers may have missed depicts some very encouraging developments. We have written elsewhere that Xi Jinping and Vladimir Putin may have done more than any other individuals in history to have accelerated renewable development in the West. Consider the impact of the Inflation Reduction Act. Since its passing in August 2022, over $270bn has been invested in clean energy projects in the US, creating more than 170,000 new jobs. As a result, in the first half of the year, wind and solar was responsible for generating more power in the US than coal. For context, just five years ago, coal’s share was quadruple that of wind and solar combined.
Progress has also been impressive closer to home. In the UK, a former coal plant is being transformed into the world’s largest battery storage project. Meanwhile, Octopus Energy has said that it plans to invest $20bn in offshore wind by 2030. Even in China, where the default stance is often to criticise Xi’s regime, the country is believed to have invested almost five times more in renewables than in coal in the first half of 2023.
Take all these developments together and you reach the encouraging conclusion that renewables could be on track to meet all the growth in global electricity demand over the next two years. That’s the view of the IEA, but it’s backed up by what we’ve heard recently. Vestas, a leading turbine manufacturer, says it has an order backlog equivalent to more than €30bn. First Solar, the largest domestic producer of industrial-scale solar in the US, states all its capacity is sold out through until at least the end of 2025. This, of course, is only the beginning. Renewables account for no more than 10% of global energy generation on most estimates. Nonetheless, only once all new demand has been met, can renewables start eating into the remaining share of the power mix.
30 August 2023
The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in First Solar and Vestas. The author of this piece has no personal direct investment in either business. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.
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Alex Gunz, Fund Manager
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