The smart money is going clean and green.
- Wednesday, January 27, 2021
2020 was a watershed year for the clean and sustainable energy sector as policy makers globally promoted an acceleration of the energy transition from oil and facilitate the global decarbonisation. Major infrastructure and hardware investments will support economic recovery post Covid and satisfy the growing awareness of the need for clean sustainable energy that protects our climate.
We are in the early stages of a major long running growth trend of the decarbonisation of the whole energy and transport industry that will provide many attractive investment opportunities. Think of the scale of replacement of the world’s energy provision, cars, lorries, trains and aircraft as well as adding the expected advancements in technology and artificial intelligence.
The main themes and trends in 2020 for sustainable energy were;
- The global demand for energy fell in 2020 due to lockdowns but demand for renewable energy grew.
- Lithium-ion battery manufacturing grew rapidly and saw the cost of a battery pack fall to US$137 per kilo watt hour.
- Electric car sales increased with more electric cars sold in Europe than diesel powered cars.
- The solar power industry returned to growth by Q3 2020 with Chinese demand leading the way.
It is expected that energy transition will remain central to the political and post Covid recovery debate as it offers solutions for energy security, lower carbon emissions and pollution levels for almost every country.
Within the electrification sector, the Lithium-ion battery manufacturing capacity outside China will rise as demand for electric cars is expected to double to 4 million new cars in 2021. The UK government has been advised by industry experts to prioritise the establishment of a battery giga factory in the UK as a matter of urgency. The future of the UK car manufacturing industry will depend upon these new technologies being produced in the UK. Car makers will want battery plants near their manufacturing centres. The recent Nissan announcement of its commitment to UK car manufacturing in Sunderland could be the start of a new future for UK made electric cars.
The pin up stock for the electrification sector has been Tesla. Tesla stock grew 800% in 2020 and now has a capitalisation of US$820bn, making it worth half of the entire global car industry but only produces 1% of the worlds car production. The company is valued at around US$2.1million for every car it has sold. Elon Musk is an intelligent founder and visionary as it is not the present but future that gives Tesla its rich valuations.
Our 34th Edition of our investment portfolios has introduced the IShares Global Clean Energy Fund ETF. This fund has enjoyed spectacular returns over the past 5 years and grew by 150.82% in the past 12 months. We are also monitoring the Guinness Sustainable Energy fund for future inclusion. We expect our exposure to the clean energy sector grow over the years ahead.
Chris DaviesChartered Financial Adviser
Chris is a Chartered Independent Financial Adviser and leads the investment team.