Investment trust insider on renewables, power prices and inflation – James Carthew: Inflation and high gas prices are good news for renewable income funds
Last June, I wrote an article that sought to delve a bit into the many different assumptions that go into calculating net asset values (NAVs) for renewable energy funds, excluding the energy storage companies. Two of the most influential inputs – power prices and the rate of inflation – have been going in their favour.
That bodes well, but remember: there is considerable variation in the sensitivity of these closed-ended funds to these two factors. We have moved on a long way from the days when the renewable energy sector was in its infancy and the investment companies tended to be relatively simple.
Today Greencoat UK Wind (UKW), Bluefield Solar (BSIF) and the recently launched Atrato Onsite Energy (ROOF) are the only listed renewable energy funds with a pure UK focus. Power price hikes and inflation are affecting many other countries that the sector is exposed to, but to different extents.
UK subsidies are index-linked to the retail prices index. RPI was at 7.5% at the end of December and is running ahead of CPI, or the consumer prices index, which is the other main cost-of-living measure.
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