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
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