Season 6, Post 24: Make Euros while the sun shines
Football was not the only reason why Munich was busy last week. In appropriately warm and sunny weather with the mercury touching 29 degrees, over 80,000 people – your author included – descended on the smarter E Europe. This major three-day conference-cum-exhibition embraces energy with a particular focus on solar and battery storage, both future trends that are likely to grow in importance. More than 3,000 businesses from across the world were present as well as a range of industry leaders.
What stood out most clearly was the significant presence of Chinese vendors and the relative absence of their US counterparts. American vendors, we were told, were not as willing to be commercial (i.e. reduce) prices and currently prefer to focus on their domestic market, given the size of the opportunity. If anything, Chinese corporates appear keen to gain market share in Europe, ahead of a potentially more adverse political climate. Best estimates, we learned, suggest that 70-80% of all utility/industrial-scale solar sold in Europe currently comes from China.
Demand for solar is clear. The three reasons most commonly cited were: as a source of hedging against volatile power prices, attractive payback times (given the falling prices of panels) and as a response to data centre requirements. Data centres have high density and are power intensive. They consume 10-50 times more energy than per square metre relative to a typical commercial office space, according to information from McKinsey shared in a presentation. The major hyperscalers are already the largest buyers of PPAs (purchase power agreements, typically with utilities) for renewable energy in Europe. Looking forward, many solar businesses are seeking to partner with wind and battery peers in order to develop ‘energy clusters’ to serve these customers more effectively.
This should be good news for the industry but we were reminded by several participants that “action is needed on a major scale” if grids are to keep up with the energy transition. Upgrading grid infrastructure, we were told on many occasions, is a “multi-year event” that requires industry-wide cooperation and political buy-in. Fewer than 50% of Europe’s nations have “appropriate plans,” according to industry body, SolarPower Europe. Other challenges for the industry include permitting (particularly in France and Italy) land availability and access to financing. Consider these issues as potential clouds cast on what should be a broadly sunny outlook for solar.
26 June 2024
The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.
Click to here view all Blog posts.
Alex Gunz, Fund Manager
Photos by the author.
Disclaimers
The document is provided for information purposes only and does not constitute investment advice or any recommendation to buy, or sell or otherwise transact in any investments. The document is not intended to be construed as investment research. The contents of this document are based upon sources of information which Heptagon Capital LLP believes to be reliable. However, except to the extent required by applicable law or regulations, no guarantee, warranty or representation (express or implied) is given as to the accuracy or completeness of this document or its contents and, Heptagon Capital LLP, its affiliate companies and its members, officers, employees, agents and advisors do not accept any liability or responsibility in respect of the information or any views expressed herein. Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. Where this document provides forward-looking statements which are based on relevant reports, current opinions, expectations and projections, actual results could differ materially from those anticipated in such statements. All opinions and estimates included in the document are subject to change without notice and Heptagon Capital LLP is under no obligation to update or revise information contained in the document. Furthermore, Heptagon Capital LLP disclaims any liability for any loss, damage, costs or expenses (including direct, indirect, special and consequential) howsoever arising which any person may suffer or incur as a result of viewing or utilising any information included in this document.
The document is protected by copyright. The use of any trademarks and logos displayed in the document without Heptagon Capital LLP’s prior written consent is strictly prohibited. Information in the document must not be published or redistributed without Heptagon Capital LLP’s prior written consent.
Heptagon Capital LLP, 63 Brook Street, Mayfair, London W1K 4HS
tel +44 20 7070 1800
email [email protected]
Partnership No: OC307355 Registered in England and Wales Authorised & Regulated by the Financial Conduct Authority
Heptagon Capital Limited is licenced to conduct investment services by the Malta Financial Services Authority.
