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New Energy Economy Opportunities

July 14, 2019
Lachie Ives

From exchange-traded funds (“ETFs”) that enable you to invest in energy-specific marketable securities, to financing projects and product innovations, the scope of investment options is extensive. Then there is the entire renewables sector, whereby developing new, sustainable, and innovative forms of energy production is a global concern.

Emerging markets – Energy Infrastructure Investment

Globally, solar is still the main focus of renewable energy investment, despite a decreased level of investment year-over-year due to falling solar technology costs and reduced solar power deployment.

Renewable energy investment reached US$288.9 billion, according to REN21’s Renewables 2019 Global Status Report, with wind power investment showing a two percent yearly increase in 2018. Geographically, China led investment for a seventh consecutive year, accounting for 32 percent of global total investment, followed by Europe, then the United States. Global investment in renewable energy capacity increased
2% in 2020, resisting the economic crisis caused by Covid-19. Investment in renewable power and fuels hit US$303.5 billion in 2020 showing a steady increase in investment year on year. The total amount invested in clean energy is increasing with the IEA expecting US$750 billion to be spent on all clean energy technologies and efficiency worldwide in 2021.

China

Turkey received a very high volume of investment attention from China in 2018 with over 1,000 Chinese firms operating in Turkey’s energy and logistics sectors, as well as other areas such as finance and real estate. An example being the Emba Elektrik Üretim A.Ş. lignite-powered thermal power plant in Turkey’s southern province of Adana – a joint venture project between Shanghai Electric Power, Avic-Intl Project Engineering Company and local Turkish investors.

A notable characteristic of China’s investments is that more than 50 percent of its worldwide power generation projects are orientated towards clean sources – hydro, wind and solar. At least 93 percent of China’s energy loans – of values up to US$8 billion, went to participating countries and regions in the Belt and Road Initiative in 2018, according to the CGEF database.

China is also a big investor in Africa. Chinese firms are the main contractor in Africa and account for 30% of new energy capacity additions in sub-Saharan Africa. OF these additions 56% are in the renewables sector focusing on hydro-power, wind, and solar. From 2010-2020 the total investment from China across Africa amounted to US$13 billion across 37 countries.

African states

African states have shown a strong opportunity for Independent Power Producers (IPPs) and corporate Power Purchase Agreements (PPAs). In South Africa, for example, where the carbon tax legislation has recently come into effect, the load shedding issue is pushing for new systems to ensure reliable energy supply. Policy adjustments proposed in the Integrated Resource Plan, meanwhile, will affect how South Africa’s energy mix will serve its power sector. Furthermore, if companies can generate their own power more effectively, corporate PPAs could provide opportunities to extend grid connectivity to other regions and exchange excess power with the municipality, in turn making energy supply more competitive.

In Kenya, meanwhile, the opening of Africa’s largest wind power project – the Lake Turkana Wind Power farm – is another step forward to the continent’s adoption of renewable technology. The farm hopes to be able to inject 310 megawatts of energy into the Kenyan national grid from its 365 turbines, with the project already saving taxpayers nearly $80 million from diesel-generated power. The economic benefits of such reliable, cheap energy – as well as scalable projects creating much needed employment – are substantial.

More recently Egypt’s Benban solar park more completed at the very end of 2019. This project is huge and is one of the largest solar farms in the world. It has the capacity to produce 1.8GW and an annual production of around 4 TWh. Its construction cost of US$4 billion and the farm covers an area of 37.2 km2.

This is a big step in the right direction for Egypt and Africa in support of the energy transition. Africa is rich in opportunities for renewable energy and offers great investment prospects from wind and solar to hydropower. The continent is ideal for the production of renewable energy.

Investing in operating infrastructure

Existing markets and technology arguably present less volatility for investors. Energy infrastructure – from power plants to wind farms, pipelines to transportation – presents areas for further investment to improve productivity and energy solutions.

Australia

In Australia, energy infrastructure is playing an integral role in supporting the construction industry as a whole, with an increase in renewable energy infrastructure of $18 billion countering a fall in residential projects. In the US, meanwhile, the America Wins Act was introduced with the aim to invest more than $1 trillion over the next decade, as well as introducing taxation for carbon pollution.

The Middle East and Russia

Alternatively, regions in the Middle East and Russia are anticipating reduced supplies of liquified natural gas (LNG) by the mid-2020s, thereby triggering efforts to strengthen the security of supply, providing alternative LNG transportation designs for greater flexibility and efficiency. And, with Finland recently inaugurating the biggest LNG terminal in the Nordics, there is certainly a market ready to be capitalised on.

The Growing Need Of Outsourcing

With the energy sector permeating niche business offerings and requiring skill sets that stretch far beyond engineering, a growing number of utilities and global energy companies are utilising outsourced solutions for operational and development projects to their advantage.

Utilities Sector Outsourcing

The energy industry is forever in a state of flux, so being able to stay up-to-date with the pace of technological change is critical. Through investment in outsourcing R&D contracts, being able to stay abreast of these developments because far simpler and more affordable, without the need to maintain full-time departments in-house and reducing costs. Such contracts also promote the development of ever-more efficient products and services that return even greater ROI.

Larger utility organisations and global energy companies are always looking to work with third parties that can deliver knowledge and services at better price points and with greater efficiency. In Germany, for example, Sungrow and Smart Power entered a partnership for the supply of energy storage solutions. Doing so helped Smart Power overcome the technological challenges associated with the national grid, instead enabling the integrated storage system developed by Sungrow.

Gain expert energy investment advice

When it comes to the energy sector, latching onto the right opportunity at the right time has the potential to return profits that are truly exceptional.

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