Investment trust insider on energy efficiency – James Carthew: The mixed fortunes of energy efficiency
Many strands must come together if we are to achieve our goal of cutting carbon emissions to net zero. The renewable energy infrastructure sector is central to this, but we need to do more than shift to renewable energy generation.
Over the past few years, three investment companies have launched, badging themselves as energy efficiency funds. The £1bn SDCL Energy Efficiency (SEIT) is the oldest and best-established of these. It has been reasonably successful, delivering total investment returns of 6.7% per annum over the past three years, which is less than its prospectus target of 7-8% but about average for the sector.
The prospectus defined energy efficiency as the efficient supply or reduction in energy demand. If we look at its portfolio at 30 September 2021 about 30% was in combined heat and power (CHP) plants (which tick the efficient supply box), 2% in lighting projects (which save energy by installing energy-efficient light bulbs), 5% in industrial process and efficiency solutions, 10% in gas distribution networks.
There were also diverse investments in areas like electric vehicle charging and energy-efficient air compressors/chillers. Part of the portfolio is in ‘traditional’ energy generation and storage – 12% in solar and 5% in biomass, but overall I think it deserves its energy efficiency label.
The Triple Point Energy Efficiency (TEEC) fund that launched in October 2020 has been struggling. It started with just £100m which it has taken a long time to invest. Because the company hasn’t generated sufficient revenue from investments to cover its dividend, it has effectively been distributing capital, eating into its net asset value. That’s one problem.
The other is… read more here