Page 19 - DIY Investor Magazine | Issue 38

CONNECTED INVESTOR TAKEAWAY - WHAT DO YOU THINK WILL KEY IN TERMS OF DECARBONISATION AND THE ROAD TO NET ZERO?
Last but not least, we are also focusing on companies that don’t
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need to worry at all, because for them it’s not a big issue; so
there are various aspects to think about as an investor.
JL: Julian, are we close to some sort of critical mass whereby companies producing the right type of decarbonized or electrified product are profitable? At the moment the returns aren’t good enough; even if the goal is there and the technology is there, it doesn’t have quite the critical mass yet for takeoff.
JB: I think the production of renewable electricity delivers reasonable returns, but there’s very little in terms of barriers
to entry to prevent somebody from generating electricity; it’s not a high value add activity. We invest in a couple of utilities that produce electricity and get a regulated return; it’s not very high, but it is decent. In terms of the cost competitiveness of renewable, it’s there; solar and wind today is very competitive with gas, coal, etc. as prices have come down a great deal. But, as Christian alluded to, the issue of the intermittency of renewable power generation remains; it’s very hard to store or transport energy.
A couple of things interest us; despite all the talk of batteries and so on, the easiest way to store electricity on an industrial scale today, is actually just to pump water up a hill and then get it back down when you need it – ‘pumped storage’.
JL: Not very avant garde.
CS: Absolutely. As Julian alluded to, the decarbonization we’re facing here, will be a companion factor for the next decade or two.
It will create all sorts of fault lines in the economy; fault lines for companies that have to decarbonize, fault lines for companies that create business, or have businesses that help decarbonize -luckily, those that that do not have to worry too much about it. You’re right, it’s a cheap source of energy right now, and the infrastructure is in place.
To decarbonize means the economy has to shift completely in terms of supplying energy to companies that use it and have consumers that use the energy out there.
Aug 2023
DIY Investor Magazine ·
So where we’re filling up the car with diesel or gasoline currently,
JB: It’s not, but it’s what you need to do; to store electricity on
a massive scale, you let it back down - a sort of small scale electricity needs to be distributed going forward. There will be a
hydroelectricity plant. That’s pretty much the most sophisticated plug in power station that will be refuelling the vehicle at home,
potentially, but that puts a lot of attention on the grid.
way of storing energy today and you get 75/80% of your energy back. The need for storage really complicates the economics of electricity, and is one of the most significant problems to
At the same time, we’re shifting away from carbon and fossil fuel
driven electricity generation, to more sustainable providers.
overcome. So electricity generation makes profit and is cost competitive; we now need to solve the issue of storage and Unfortunately, this creates more volatile power, and the grid
transportability.
needs to accustom itself to that. So, a lot of fault lines out
there, but this creates opportunities for companies shifting the
infrastructure forward.
It will create opportunities for companies that win the race to decarbonize and separate themselves from its peers.