Why is inflation is generating profits for some energy firms

Rising energy prices are mostly good news for renewable energy funds, but the outlook is complex.

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The UK could have a solar capacity surplus by 2035.
(Image credit: © Alamy)

High energy prices benefit oil and gas firms, but they are also benefiting renewable energy funds. Just last week energy-storage fund Harmony Energy Income Trust (LSE: HEIT) announced that its net asset value (NAV) per share increased by 8.8% to 108.9p per share in the quarter to 30 April. Much of the uplift came from higher revenue assumptions, reflecting updates to power price forecasts.

Exactly how the relationship between rising energy prices, and profits and assets works is more complex for renewables than oil and gas. First, wind and solar projects benefit from subsidies which usually have some explicit inflation protection built into them (energy storage firms have very different dynamics).

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David C. Stevenson
Contributor

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire. He writes his own widely read Adventurous Investor SubStack newsletter at davidstevenson.substack.com

David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit www.altfi.com as well as www.etfstream.com in the asset management space. 

Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business. 

David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust. 

In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.