The following is a piece I was reading this morning from LGT Wealth Management. I thought it was interesting and hope you do too.
“The global energy complex is under pressure. Supplies, already constrained due to Russian sanctions, have been further strangled by the impact of the summer heatwave. In France, which frequently relies on up to 70% of its energy from nuclear, the rivers essential to the cooling of the reactors are too warm, reducing current nuclear energy production by half. Germany’s Rhine River is currently too shallow to transport cargo, including traditional energy, and the Sichuan province of China which relies on hydropower for 82% of its power generation, is seeing its worst drought in more than half a century halving hydropower capacity and causing a number of factories to close. Even efficiency of solar energy is impacted by hot weather. For every degree above 25C, the efficiency of a solar panel can drop by as much as 0.5%. When a panel temperature reaches 45C, the solar efficiency could fall by 10%.
You could be mistaken for thinking that the soaring traditional energy prices are a source of distraction from investment in green energy, which ironically is made more inefficient by the summer heatwave. In fact, it is quite the opposite.
The US
Last month, the US passed a historic Inflation Reduction Act. Whilst many countries have recently approved climate packages and enforced regulation, the size and scope of this Act should not be underestimated. It represents more than $370billion of investment and subsidies to be spent over 10 years dedicated to climate and energy measures. These include tax credits for EVs, $20bn spent on clean vehicle manufacturing facilities, 10 years of consumer residential energy tax credits and $20billion to support climate-smart agricultural practices.
The EU
In response to the outbreak of war in Ukraine, the European Union published their plan to reduce reliance on Russian oil and gas. This represents spending of circa €300bn by 2030[1] and includes investing in solar and wind power, energy storage investment, green hydrogen innovation and promotes awarding of permits to renewable energy projects.
China
Whilst these significant commitments by some of the developed world’s largest economic powers seem encouraging, they pale into comparison to the levels of deployed climate investment since already this year by China. Last year, China accounted for 46% of the world’s new construction of renewable energy infrastructure, investing $380bn, more than any other country during 2021. China’s solar energy spending for the first six months of this year has totalled $42 billion (173% higher than last year). The country’s spending on new wind projects totalled $58 billion (107% above 2021 levels). According to China Renewable Energy Engineering Institute, the country is set to install a record 156 gigawatts of wind turbines and solar panels this year. By comparison under the Inflation Reduction Act, additions to US wind capacity could increase from 15 to 39 gigawatts per year in 2025-2026, according to researchers at Princeton University.
China leads global energy transition spending
Public and private investments, 2012-2021
Source: BloombergNEP, Note: The UK is included in EU calculations until 2020
The energy transition represents one of the most environmentally, but also economically, important shifts of recent times.”
Inevitably this transition will throw up exciting investment opportunities around the globe which our highly diversified portfolios (managed by EBI) are well positioned to take full advantage of.
I do hope the above makes sense but, as always, if you have any concerns about your own financial arrangements or would like to discuss whether you are truly making the most of your money, please do not hesitate to call me.
With kind regards,
Yours sincerely
Graham Ponting CFP Chartered FCSI
Managing Partner
1 G. Lengauer, F. Esser, R. Berganza, Negativity in political news: A review of concepts, operationalizations and key findings. Journalism 13, 179–202 (2012)
