IN­VEST­ING IN SOURCES OF LIGHT AND POWER

Re­new­able en­ergy is a com­plex sec­tor and the com­pa­nies in it have dif­fer­ent tech­nolo­gies, markets, vul­ner­a­bil­i­ties and prospects, writes Char­lotte Mathews

Financial Mail - Investors Monthly - - Cover Story -

here’s scarcely a seat to be found on the re­new­able en­ergy band­wagon in SA now, es­pe­cially since Eskom has cut the sched­ule by in­di­cat­ing its un­will­ing­ness to sign new re­new­able en­ergy off­take agree­ments.

But this is likely to turn out to be a small blip in the long-term growth sce­nar­ios that a num­ber of think tanks en­vis­age for re­new­able en­ergy based on the African con­ti­nent’s need to ad­dress a se­vere back­log in en­ergy pro­vi­sion, in­creas­ingly com­pet­i­tive costs of re­new­ables and pres­sure from en­vi­ron­men­tal lob­by­ists to add more car­bon-neu­tral en­ergy sources.

There is a difference be­tween re­new­able and al­ter­na­tive en­ergy sources: re­new­able sources are wind, sun and hy­dropower, while al­ter­na­tive en­ergy can be de­rived from wast­ing pro­cesses such as in the ura­nium or in­dus­trial sec­tors as long as these sources are car­bon neu­tral. At present the JSE has only two listed com­pa­nies that qual­ify as “green”: Hulisani and Mon­tauk Hold­ings.

In SA al­ter­na­tive en­ergy could also re­fer to any busi­ness that com­petes with Eskom, since Eskom’s track record of un­re­li­able de­liv­ery and well-above-in­fla­tion tar­iff in­creases has opened new op­por­tu­ni­ties in gas, gen­er­a­tors and bat­ter­ies.

The fu­ture of those busi­nesses

Tis not only re­ac­tionary to Eskom, though. They can also meet SA’s grow­ing mar­ket for gas, tem­po­rary gen­er­a­tor power or off-grid solutions in re­mote ar­eas. Diesel gen­er­a­tors are hardly car­bon neu­tral, but some broader en­ergy busi­nesses may of­fer at­trac­tive re­turns in the long run.

The BP En­ergy Out­look’s base case to 2035 fore­casts that though world GDP will more than dou­ble in the next 18 years, the level of en­ergy needed for that will grow only by about a third be­cause of en­ergy ef­fi­ciency gains. The re­port foresees that fos­sil fu­els will remain dom­i­nant, pro­vid­ing about 60% of the ad­di­tional en­ergy and ac­count­ing for al­most 80% of to­tal en­ergy sup­plies in 2035. Gas will be the fastest-grow­ing fos­sil fuel but re­new­ables should grow four­fold.

The US En­ergy In­for­ma­tion Ad­min­is­tra­tion (EIA) says in its In­ter­na­tional En­ergy Out­look 2016 that its base case sce­nario is for world en­ergy con­sump­tion to rise 48% be­tween 2012 and 2040, mostly in the non-OECD coun­tries and par­tic­u­larly in In­dia and China. It foresees re­new­able en­ergy con­sump­tion ris­ing 2.6%/year in that pe­riod, with nu­clear en­ergy the sec­ond-fastest grow­ing tech­nol­ogy at 2.3% growth and coal the slow­est, at 0.6%. The EIA ex­pects fos­sil fu­els, mainly nat­u­ral gas, to rep­re­sent 78% of global en­ergy use by 2040. It says Africa’s en­ergy con­sump­tion will more than dou­ble in the re­view pe­riod, as GDP growth will av­er­age 4.8%/year, but this will vary greatly within the con­ti­nent.

Only one JSE-listed share offers ex­po­sure to re­new­able en­ergy out­side SA: Mon­tauk Hold­ings. It was listed after its

Picture: iSTOCK

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