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Green Energy: A round up of the biggest trends, stock picks, and where to in 2022?
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A few experts in the field give us the low-down on the biggest green energy trends, their stock picks, and what we can expect in the year ahead.
TIM BUCKLEY
Institute for Energy Economics & Financial Analysis, director of energy finance studies
Q: What were the biggest trends of 2021?
“The biggest new green energy trend of 2021 to me is the UN sponsored global financial alliance for net zero emissions by 2050 pledged to 1.5 degrees C, with 405 groups managing a collective US$130 trillion as of Nov 2021,” he said.
“That is six times the GDP of the US by comparison, and so it gives huge credence to the point Larry Fink – the CEO of BlackRock – now makes repeatedly about the tsunami of capital reallocation.
“Combine that with the US$4 trillion of annual investment in energy globally likely to be required by 2030 onwards, and the investment opportunities are simply enormous – and so what was all about stranded asset carbon emissions risk management has turned into a pursuit of the opportunities.”
Q: Where to in 2022?
“Globally in 2022 I think people will be talking about the inevitability of carbon pricing,” Buckley said.
“Carbon pricing will become a global reality in the financial markets in terms of inevitability and once it’s inevitable, financial markets therefore price it in immediately.
“China announced its national ETS – emissions trading scheme, which is the biggest in the world – will expand dramatically in two years’ time to include cement and aluminium. Right now it just includes power.
“Isn’t China our biggest trade partner? Do you think they will let us have a free pass while they do the heavy work?
“Global investors and global players will put this on us, and it will probably start with a methane fee.”
Q: Stock picks?
“ASX listed companies are hamstrung by the failure of energy and climate policy in Australia – I invest in companies that have shares go up over time, not through the floor.
“My favourites are companies such as Orsted – a Danish multinational power company and NextEra Energy Inc – America’s largest capital investor in infrastructure.
“NextEra shares are at an all-time high, up 500% in the last decade,” Buckley said.
“The third one is ENEL Italy, a multinational manufacturer and distributor of electricity and gas – it is already the world’s biggest investor in renewable energy in the developing world with plans to invest $2 billion euros in accelerating the energy transition between now and 2030.”
PETER GARNRY
Saxo Bank head of equity strategy
Q: What were the biggest trends of 2021?
“It has been a quite dramatic year for the green sector. Primarily due to the increase in commodity prices, solar power has been hit quite hard this year, which has taken its toll on energy-producing sectors,” he said.
“The most successful aspects of the green transformation in 2021 have been the battery and energy storage area, which makes sense as it is connected to the electrical vehicle development.
“It is quite remarkable to see how much the overall valuation of the car industry has gone up since electrical vehicles started to become a thing even though the output hasn’t followed suit.
“If the market is right, this means that car makers will be able to make larger profits creating electrical vehicles than petrol-fuelled ones.”
Q: Where to in 2022?
“When we look at solar energy, there’s huge opportunities to develop and the path to create more efficient solar panels is there and the potential is enormous even though the rise in commodity prices is putting pressure on it right now,” Garnry said.
“I think nuclear is also gaining more traction and the EU is starting to open up for using it as a green energy source because it doesn’t emit.
“But I believe that even though it’s been around for longer, that fusion power could be the code we need to crack. If we break that, then we get an energy source, with a lot of potential.”
Q: Stock picks?
EMILIE O’NEILL
Perennial Partners co-head of ESG and equities analyst
Q: What were the biggest trends of 2021?
“2021 has been a big year for the green energy sector,” she said.
“As investors, we are noticing significantly increased focus on green hydrogen as a potential energy source and we have seen ongoing offshore investor interest in acquiring Australian renewable energy assets.
“For example, Shell recently purchased Meridian Energy Australian assets, Powershop and investor attention has intensified on fossil fuels and created pressure for corporates to set emission targets.
“Investors are using their proxy voting responsibilities to vote for shareholder resolutions related to climate change and alignment with the Paris Agreement such as with Santos and Woodside.
“The investor pressure has resulted in greater corporate focus on reducing emissions including through divestment of high carbon intensity assets and increased focus on voluntarily offsetting emissions which has led to rising carbon prices.”
Q: Where to in 2022?
“We expect to see investments by large energy players and institutional investors into green energy solutions such as renewables, energy storage and hydrogen as well as an increase in the number of companies commercialising technologies that reduce carbon,” O’Neill said.
“For example, one of our holdings Calix (ASX: CXL) just filed a patent for their ZESTY technology which aims to decarbonise the iron ore process.
“We will continue to see an ongoing focus by listed companies on how to reduce their carbon footprint, including through divestment of high carbon intensity assets,” she said.
“We can expect increasing commitments by corporate Australia to move to renewable energy sources including solutions close to the source of energy use such as solar and batteries and this will likely result in continued voluntary offsetting from Australian corporates and rising carbon prices to continue as companies seek to offset emissions.”
Q: Stock picks?
“The eInvest Better Future Fund (ASX: IMPQ) holds positions in Meridian Energy (ASX: MEZ) and Mercury NZ (ASX: MCY) which are both 100% renewable energy providers in New Zealand,” she said.
“The New Zealand energy market is supported by almost 80% renewable energy – this compares to Australia’s energy market at around 25%.
“We are expecting increased interest in private renewable energy providers and companies with technology to assist with the energy transition listing on the ASX next year.”
JOHN ROLES
University of Queensland research fellow and Lavo Technology project director
Q: What were the biggest trends of 2021?
“The announcement of government support for the hydrogen industry was particularly significant but hopefully the Australian Government understands the opportunities for hydrogen development don’t just reside in the production of hydrogen – there is a whole industry that goes around that including the production of the equipment.
“On another note, the emphasis is not so much on energy production but on energy storage – this has been the evolving case for the last two years where we have started to experience this problem of curtailment of solar production and the focus is fairly rapidly changing into different means of energy storage.”
Q: Where to in 2022?
“In 2022 there will be a proliferation of companies coming up with various types of hydrogen solutions – this is not just something that is happening in Australia, it is happening worldwide where hydrogen is being recognised as the selected technology energy carrier.
“Australia can produce hydrogen cheaper than probably anywhere in the world but the difficulty will be in the transport of that hydrogen.
“Renewable energy is already disrupting other industries – people are moving away from coal and are recognising that further development of solar without storage solutions doesn’t make any sense when you are getting 0 dollars per megawatt hour for your product, it just doesn’t make sense anymore without a solution for storage.”
Q: Stock picks?
“I look at the subsequent companies that benefit from changes in technology, so not the hydrogen producing companies but the companies that produce say nickel or one of the major products that will be required in the major utilisation of hydrogen.
“My stock pick is Sunrise Energy Metals (ASX:SRL) – they have one of the largest, undeveloped deposits of nickel and cobalt in the world and both of these materials are key to large-scale battery production and the metal hydrides used for the storage and transport of hydrogen.”
