In response to the war in Ukraine, many people have pointed out that Europe must restart using coal-fired power plants and buy more liquified natural gas (LNG) from shale gas sources in the US to replace fossil fuels supplied by Russia. In our view, this narrative is misleading. Doing so would mean climate change mitigation is no longer a priority.
Coal, crude and natural gas did not become any more investible, cleaner, cheaper or less volatile since the invasion of Ukraine. Security of supply is a top priority for all countries – the EU in particular due to its reliance on Russia – and the need to accelerate the transition to clean energy remains undeniable.
Our global power industry was built around large, centralised power stations, mostly powered by coal and natural gas. But all of that is changing. The two key short-term solutions are in the hands of consumers: to embrace energy efficiency and, whenever possible, to produce electricity at the point of consumption.
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Until recently, generating electricity “behind the meter” – ie, on the user’s site – has been challenging for technical and economic reasons. But substantial declines in the cost of solar panels and batteries have made these solutions price-competitive.
The companies in our portfolio help the world to decarbonise. They are also digital, decentralised, and deflationary. Renewable energy generation is a greener, more cost-efficient alternative to an ageing and increasingly obsolete centralised electric power system.
A solar future
Meyer Burger Technology (Zurich: MBTN) is a European producer of higher-end solar rooftop panels. The European Commission is aiming to install 15 terawatt-hours’ (TWh) worth of solar rooftops by the end of 2022, which would require seven gigawatts (GWs) of behind-the-meter solar panels to be added to the system. Almost 26GW of solar was added to the grids across the 27 EU member states in 2021, bringing the total installed capacity to nearly 165GW. (Current capacity predominantly consists of utility-scale installations.)
Smarter storage
Stem (NYSE: STEM) is a US-based smart energy storage and energy management software company, which combines hardware, software and artificial intelligence to create storage solutions that maximise renewable energy generation to build a cleaner grid. The company had a market capitalisation of $1.69bn at the end of last month. The clean energy storage market in the US alone is likely to grow over 120 times by 2035, and Stem is very well positioned to profit from this opportunity.
Improving efficiency
Ameresco (NYSE: AMRC) provides energy efficiency solutions, which is irrefutably one of the few short-term answers to the current energy crisis. It operates in the US, Canada and Europe and revenues for its 2021 financial year reached $1.2bn. The company has reiterated guidance for what it expects to be another year of strong growth. Revenues for 2021 are forecast to come in at between $1.83bn and $1.87bn, and adjusted earnings before interest, taxes, depreciation, and amortisation (Ebitda) between $200m and $210m. Energy conservation to generate cost-savings is a top priority worldwide, and Ameresco is a key player in the sector.
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