Taking a look at #Energy – Research Highlights

Editorial Team OpinioPro
By April 2, 2021 10:55

Taking a look at #Energy – Research Highlights

Taking a look at #Energy – Research Highlights

In February, UBP published an article named “Why renewable energy has come of age in 2020”. In this article, UBP tries to discover the reason for the huge outperformance for the renewable energy sector during the last 12 months.

The first reason that they found, was that even though regular electricity usage has decreased over the last 12 months, renewable energy usage was up by around 7%. Next to the increased usage, the decline in the cost of producing renewable energy has continued to drop which makes it more competitive against fossil fuels. Another force that has been improving the outlook for renewable energy, is the supportive environment created by several governments with the U.S., China and Europe reinstating their efforts towards reducing carbon emission. The new U.S. administration will even invest up to $2 trillion US Dollars towards attaining the goal of a carbon-neutral energy sector.

On top of all the positive forces supporting the sector, rising profit margins, and improving long-term prospects are expected to be seen within the sector according to UBP. They state that 2020 has marked the start of ‘a new cycle’ for the production of energy.

In a recent publication by Aegon Asset Management, the process of capturing carbon emissions is highlighted. In the Sustainable Development Scenario the International Energy Agency (IEA) expects carbon capture technology to grow more than hundred-fold by 2050. Aegon AM expects that carbon capture technology will mostly be deployed in industries with large non-energy process carbon emission.

Aegon AM sees 4 large challenges for Carbon Capture and Storage technology (CCS) to be adapted. The first obstacle is the fact that industrial processes are optimised for efficiency, which implementing CCS could disrupt. Next to the efficiency problem, the infrastructure required for carbon capture will require significant investments. Due to CO2 having barely any market value, the development of CCS will have to be incentivised by regulation. Finally, there are alternatives for the CCS that are both cheaper and further in their development in the forms of renewable energy or other low carbon fuel according to Aegon Asset Management.

At the moment, CCS is not a very strong investment candidate for Aegon Asset Management. Finding good uses for the captured carbon would be the key to make CCS an attractive candidate according to them.

Finally, BNP Paribas Asset Management published an article on the current opportunities within green energy investments. BNP Paribas AM starts by stating that the healthy shakeout of generalist investors out of green energy ETF’s are the reason for the recent 28% plunge since January. BNP Paribas AM expects that there will become a larger differentiation between structural winners and losers in the renewable energy sector. Some tips are to avoid interest-rate sensitive infrastructure and commoditised environmental solutions in segments with low barriers to entry, finally diversification is key according to BNP Paribas AM.

Furthermore, they suggest that governments and central banks will do everything in their power to enable the economic recovery post COVID-19. A tilt towards ‘cyclicals’ and ‘value’ is how BNP Paribas AM has sailed the market since June 2020.

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Editorial Team OpinioPro
By April 2, 2021 10:55

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