New Year, clean slate? Why 2018 will be the year of investing in renewables

The transition to green energy is accelerating, with 2018 expected to deliver new investment opportunities as technological innovation and falling costs drive further momentum for change.

What started as a government-subsidised process to decarbonise the power sector is now shifting to a process driven by expenditure and economics. Over the next 12 months, as the cost of clean technology continues to fall, we expect to see an acceleration in investment, in both developed economies and fast-growing industrialising nations.

Against this backdrop, the ability of renewables to deliver what we think are stable and sustainable income streams, means they are likely to remain an attractive source of dividends and total returns.

For a full article on the renewables revolution, visit our Markets 2018 website.

Paul Flood – fund manager and strategist. Newton, a BNY Mellon company

The transition to green energy is accelerating, with 2018 expected to deliver new investment opportunities as technological innovation and falling costs drive further momentum for change. What started as a government-subsidised process to decarbonise the power sector is now shifting to a process driven by expenditure and economics. Over the next 12 months, as the cost of clean technology continues … read more

  • Download
  • Print
0 comments | Join the conversation, comment now
Shielding from inflation

If you are looking to invest for the long term, we believe you should look to protect your assets against the potential ravages of inflation. Unlike cash and most conventional bonds, assets with inflation-linked contracts, such as renewables and infrastructure, are very attractive for long-term investors/savers because they offer a degree of in-built inflation protection. A large proportion of the revenue streams of these assets are backed by government subsidies making them a generally robust and stable proposition.

Renewables can provide stable long-term cash flows, with a good line of sight. Yet it is an asset class that tends to get overlooked despite being less affected by quantitative easing and zero interest-rate policies compared to other financial assets.

As long as the sun comes up every day, you’re going to sell power for something. In some senses, investing in renewables is like investing in bonds, except with some sensitivity to the price for generating power.

Paul Flood – Newton, a BNY Mellon company

If you are looking to invest for the long term, we believe you should look to protect your assets against the potential ravages of inflation. Unlike cash and most conventional bonds, assets with inflation-linked contracts, such as renewables and infrastructure, are very attractive for long-term investors/savers because they offer a degree of in-built inflation protection. A large proportion of the … read more

  • Download
  • Print
0 comments | Join the conversation, comment now
Winds of change: a big leap forward for renewables

Between 2004 and 2014, renewable energy’s share in Europe doubled from about 8% to 16%, and it is still growing. We are nearing a tipping point, and in certain niches, we believe wind power has significant potential to disrupt the traditional energy market.

As a percentage of all incremental future electric capacity, wind power is taking a big leap forward from a small base.  At the same time, its cost base has fallen, making wind power increasingly competitive with coal and gas in many markets, even on an unsubsidised basis.  (In fact, it is directly competitive at generation, but loses some efficacy once the costs of backup and grid connections are factored in.)

Setting aside the recent drop in commodity prices, the costs of wind power are declining more rapidly and more sustainably than conventional power. In addition, clean air standards are driving widespread adoption, regardless of whether wind power costs a penny or two more.

Mark Bogar and Andrew Leger – The Boston Company Asset Management, a BNY Mellon company

Between 2004 and 2014, renewable energy’s share in Europe doubled from about 8% to 16%, and it is still growing. We are nearing a tipping point, and in certain niches, we believe wind power has significant potential to disrupt the traditional energy market. As a percentage of all incremental future electric capacity, wind power is taking a big leap forward … read more

  • Download
  • Print
0 comments | Join the conversation, comment now
Renewables: a sun-kissed proposition

The National Grid has forecast its lowest-ever summer peak electricity demand on its transmission grid of 37.5GW due to the amount of solar PV generation (see above). The system operator said UK capacity in the sector rose to 4.4 gigawatts in February from 2.4 gigawatts in the same month of 2014. Levels are expected to reach 5.5 gigawatts by February 2016.

In the UK we’ve been taking exposure to wind and solar assets already connected to the grid. The opportunities we’ve found are inflation-linked and have cash-flows around 60% derived from government subsidies. Generally, we’re getting an internal rate of return of 7-9% with a dividend yield of 6-7%.

In our view, there’s good legal and political protection from retroactive changes to prices, which means it’s difficult for the government to reduce subsidies for existing assets. One of Newton’s themes – “State Intervention” – is both a benefit and a risk here, but in the UK we feel fairly confident. The government is keen to build out its renewables infrastructure given EU commitments, so to retroactively change subsidies would dis-incentivise future private sector investment.

Paul Flood – Newton, a BNY Mellon company

The National Grid has forecast its lowest-ever summer peak electricity demand on its transmission grid of 37.5GW due to the amount of solar PV generation (see above). The system operator said UK capacity in the sector rose to 4.4 gigawatts in February from 2.4 gigawatts in the same month of 2014. Levels are expected to reach 5.5 gigawatts by February … read more

  • Download
  • Print
0 comments | Join the conversation, comment now