Wind blowing behind renewables: A spur to invest in the sector?


Wind is blowing behind renewables: Change in energy trends points one way and you could see this as a spur to change your strategy towards sector

The capping of energy prices has cooled the fuel bill crisis. But although alarm over soaring costs may have lessened, calls are growing for a more rapid transition to renewable energy sources such as wind and solar. 

This year’s geopolitical chaos has focused minds on how to keep the lights on without costing the earth, and Liz Truss has pledged her commitment to net zero. 

Such is the interest in the renewables sector that the share price of the Gresham House Energy Storage investment trust is at a 32 per cent premium to the value of its net assets. 

Alarm: This year’s geopolitical chaos has focused minds on how to keep the lights on without costing the earth

This trust backs the battery operator businesses that store excess renewables supply. 

In 2021, $755billion was invested worldwide in the transition to ‘clean’ energy sources, according to a Bloomberg study, but future expenditure will far exceed this sum. 

For example, the International Energy Agency estimates that $820billion a year must be spent on power grids – the cables that link offshore wind farms and other power sources with consumers – if global warming is to be limited to 1.5 degrees Celsius by 2030. Annual outlay now is about $260billion. 

Anyone building a long-term portfolio should be paying attention to these global trends, whether you wish to save the planet, or believe that politicians’ top priorities will be to keep consumers’ fuel bills low and strengthen energy security. 

For the Prime Minister, this is one of the issues that is top of the agenda. 

These are the reasons why, although reliance on fossil fuels may last longer than we thought before the war in Ukraine, I have been committing more cash to renewables. 

The UK may not buy energy directly from Russia, but the EU’s attempts to curtail its dependence on this source – it imports 57 per cent of its energy needs – has raised competition for supplies, causing prices to surge. 

Will Riley, manager of the Guinness Sustainable Energy fund, argues that these conditions highlight the requirement to boost energy security through the more efficient use of power and the move to solar, wind and the other renewables, activities in which this fund invests. 

Chris Greenland, manager of the Sanlam Multi-Strategy fund also contends that this is a propitious moment to take a bet on the ‘multi-decade’ changes in the energy landscape. 

He says: ‘One of fundamental advantages of renewables is that the input fuels – wind and sunshine – are free.’ 

Solar may be a more predictable resource than wind, especially offshore wind. 

But since both come for free, it is likely that the Government will do more to bring down the price of the long-term supply contracts held by renewables companies, which are based on the much higher price of gas. 

Controversially, this price is determined by the price of supply from the most expensive power plant meeting demand on that particular day. 

But Gresham House is not the only renewables trust standing at a premium. Others include JLEN Environmental Assets, Downing Renewables & Infrastructure, Gore Street Energy Storage, Greencoat UK Wind and SDCL Energy Efficiency. 

I am an investor in the last four of these since assessing the merits of the individual players in this industry demands familiarity with complex technologies. 

David Harrison, manager of the Rathbone Greenbank Global Sustainability Fund, opts for established companies like the energy storage group Schneider Electric and Linde, the industrial gases specialist. 

I plan to add to my holdings in trusts when share prices weaken, but also to take some bets on renewables funds. 

Dzmitry Lipski, of Interactive Investors, likes the proven track record of the iShares Global Clean Energy ETF. Lipski suggests that anyone looking for an income should consider Gravis Clean Energy Income Fund. 

The new government has taken bold action on energy bills. You could see this as a spur to change your strategy towards the sector.

Read more at DailyMail.co.uk