Investment trust insider on renewable energy funds – James Carthew: ‘Crazy’ lack of demand for cheap renewables funds
Here’s hoping Labour’s new energy drive can help re-rate renewable infrastructure funds like Downing which offer good income and growth but trade on excessive share price discounts
A few weeks ago, I put forward the buy case for Ecofin Global Utilities and Infrastructure (EGL), highlighting the impressive share price gains that some US utilities have achieved this year.
More recently, I attended the capital markets day for Downing Renewables and Infrastructure (DORE). Gareth Miller, chair of its energy market risk committee and former CEO of energy consultancy Cornwall Insight, presented some statistics on forecast electricity demand and the expected generation mix that underlines how the growth story in this sector is only just getting going.
Based on Bloomberg New Energy Finance figures, annual global spending on the energy transition is expected to grow from $1.8tn to $4.8tn by 2030 and continue to climb from there. If that sounds implausible, bear in mind that actual spending in 2023 had already doubled since 2020 and was over eight times the level from a decade earlier.
In recent weeks, the urgent need to spend this money to tackle climate change has been painfully illustrated by the devastation wrought by Hurricane Beryl in the Caribbean, flooding in multiple countries and a heatwave in the USA.
Here in the UK, Cornwall Insight reckons that the shift to electric vehicles, the substitution of electricity for fossil fuels in heavy industry and domestic heating, and new demand from things such as data centres means that demand for power could grow by about a third by 2030 and near-double by 2035. That new demand will help sustain power prices.
The new government has ambitious-sounding targets to quadruple offshore wind capacity, treble solar capacity, and double onshore wind capacity over the next decade. The big question is how this will be financed. Labour is creating a new entity – Great British Energy – which it says it will back with £8.3bn of funding over the lifetime of the current parliament.
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