Making Money
Green like a freshly minted note. Smart investment ideas are making companies, individuals and governments plenty of green dollars.
Green energy will get bang for your buck say a growing number of international investment experts. According to a joint United Nations Environment Programme and the Renewable Energy Policy Network for the 21st Century (REN21) report Global Trends in Green Energy 2009: “Globally, nearly 80 GW of renewable power capacity was added in 2009, including 31 GW of hydro and 48 GW of non-hydro capacity. This combined renewables figure is now closing in on the 83GW of fossil-fuel, thermal capacity installed in the same year. If the trend continues, then 2010 or 2011 could be the first year that new capacity added in low carbon power exceeds that in fossil-fuel stations.” The US and Europe already invest more in renewables than in conventional power.
The report details trends in the global green energy sector, including which sources attracted the greatest attention from investors and governments in different world regions. While investment dipped in some sectors, there was record investment in wind power. If spending on solar water heaters, as well as total installation costs for rooftop solar PV, were included, total investment in 2009 actually increased, bucking the economic trend. In China new private and public sector investments in core clean energy leapt 53 per cent in 2009. China added 37 gigawatts (GW) of renewable power capacity, more than any other country.
Duncan Ritchie, CEO of Aequero, a company that specialises in helping get investors and new energy projects together, says there are barriers for private sector participation in certain types of energy projects. Biomass power station projects have been quite the rage lately but due to issues of security of supply they can fail to become viable. Once a secure source of supply has been found, e.g. rice husks near a rice processing plant, that source must be within around 40 miles of the nearest point where grid connection can be made or laying the cables eats heavily into the returns. It costs around USD300,000 per kilometre of cable to connect to the grid.
Richie continues saying that power investment projects involve working with governments that may have energy needs projections well beyond the investors intended period of investment. Investors be warned, he continues “After water energy is the most political commodity on the planet.” But there are many countries that need assistance with only 50 percent of Indians grid connected. And India is, he says, remarkable in the way they have set up feed-in tarrifs.
After India Richie says “In my view the best policy environments presently for RE investment are in China, Philippines and Thailand (or Thailand will join this group after it reshapes its policy, hopefully).” Indonesia has 40% of the world’s geothermal resources (about 27 GW) and if an appropriate framework can be implemented to support the development of these resources there is a bright future for Indonesia in this area, says Richie. Laos and Nepal have good hydro potential but the latter needs to implement a framework for the development of its resource. They both have small domestic markets and so rely substantially on export to Thailand and Vietnam in the case of Laos and India in the case of Nepal, adding incremental complexity to project development. Richie concludes down the road Bhutan may join these two, but it is early days.
The other side of the coin
Michael Friedlander, APG Asset Management is making money not from investing in renewables but from investing in cleaning up the energy usage of existing stock. He helped to set up a China energy retrofit fund and was the first putting down 50 percent of the capital. Savings are then shared between the building owner and the fund. Paying back capital and delivering variable, but on a risk adjusted level, high yields. According to Friedlander “Energy retrofits are a new asset class.” It’s only a matter of time before the rest of the world catch on. For more information see page 24.
Power and Green Buildings
On top of the energy required to power them, green buildings are themselves worth investing in. Scott Dunn, director in the area of planning, design + development in Southeast Asia for AECOM speaks to RFP about some of the opportunities in that space.
Dunn says there are opportunities in the greening of buildings for countries, companies and individuals. For those of us with smaller investment budgets have a look at government policies that favour a particular industry or technology, such as green technologies that are related to the green building credit system in Singapore. With the requirement for all new buildings to be Green Mark certified and with government buildings in some areas requiring platinum certification, then any system that assists developers to achieve the requirements will be a good investment.
Population growth and urbanisation have opened up two investment opportunities for institutional investors in the areas of sustainable communities and renewable energies. Asian urban transformation has created increasing demand by consumers to live in safe, vibrant, social and environmentally sustainable communities. There is a lot of opportunities for institutional investors to participate in urban development projects in city centre environments that focus on sustainable living. We also see renewable energies as a large growth marketing across Asia. Corporates should start in-house and examining existing policies and procedures and establishing corporate social responsibility programs, examining everything from diversity in the work place to total carbon foot print of each employee. Some key areas that will reduce total carbon output as well as saving costs and increase profits include:
- Converting Grey to Green: Taking large building stock of grey (older) buildings and installing new technologies, both extending its life and cutting costs.
- Reducing company travel: Internal telecommunication systems now allow more people to meet regularly without flying to another city. This not only offers a great cost savings and reduces air emissions but also gives employees more time at home with their families.
Dunn’s pick as an industry/sector/product that is set to rocket?
Water : Micro Hydro power facilities / desalination plants that have low energy consumption.
By the numbers
In 2009 renewable sources represented:
- 25 per cent of global power (electricity) capacity (1,230 gigawatts (GW) out of 4,800 GW total all sources, including coal, gas, nuclear)
- 18 per cent of global power production
- 60 per cent of newly installed power capacity in Europe and more than 50 per cent in the US; the world as a whole should reach 50 per cent or more in newly installed power capacity from renewables in 2010 or 2011
Source: UNEP
