The surprise victory for President-elect Trump in last month’s US election has not removed opportunities for alternative energy companies to grow, as many businesses in the sector are commercially viable without subsidy or other policy support, Cantor Fitzgerald Europe has suggested.
Trump’s victory has sparked concerns for the sector, with some investors fearing the US will renege on the current administration’s policies on climate change.
However, Adam Forsyth, research analyst at Cantor Fitzgerald Europe, said the outlook for many companies in the “new energy” space was finally progressing away from reliance on government handouts, with a number poised to benefit from the expected growth for the sector.
“New energy and clean technology has been a difficult area,” Forsyth said. “Many alternative energy companies have been over reliant on policy support which has been variable, and is now even more uncertain given the US election outcome and a potentially fracturing Europe.
“But this has not prevented over 700GW of renewable generation being installed around the world, and indeed the annual market potential here could be in the order of $500bn by 2020.”
Forsyth said too much had been made of the role of politicians and subsidies when it came to the alternative energy sector, ignoring the fact that renewable energy capacity has already changed energy markets globally.
“A global policy consensus on the environment is at risk given the US election outcome, with the progress made at the Paris conference of the parties to the UN Framework Convention on Climate Change now less reliable,” he said.
“But this does not affect our investment case. Existing renewable capacity has already changed power markets around the world and that is what now dives investment opportunities.”
So where are the opportunities in the sector? Forsyth said there is a market-led “new energy wave” focused on four sectors: smart solutions and efficiency, flexible generation and storage, independent supply and distributed power, and renewable development opportunities.
Below Forsyth highlights 10 attractive stocks in a sector that he expects to shine despite the initial fears over Trump’s election.
Share price 19p. Target price 77p. Rating: Buy
“AFC, the industrial fuel cell power company, is at the point of commercialising a distributed generation fuel cell targeting key niche markets in the industrial sector. The company has made real progress in the past year and looks set to deliver commercial sales in the near future.”
Share price 0.2p. Target price 0.7p. Rating: Buy
“The smart meter developer is now a leader in narrowband wireless mesh networks, with the key deployment for the company’s technology in the smart meter space. In particular, there is a strong focus on the developing world where the benefits of smart meters are strongest.
“The company is now at an inflection point as it moves towards genuine and potentially significant revenues – but clearly there are risks, with the immediate future highly dependent on a small number of transactions.”
Electro Power Systems
Share price €5.72. Target price €10.47. Rating: Buy
“Overseas-listed Electro Power Systems has seen its technology gain traction as it moves from a grant-based development company to one that is commercially viable, with good visibility of earnings in terms of future orders. We do not see the company’s valuation as demanding given the potential for growth.”
Share price 11p. Target price 21p. Rating: Buy
“Flowgroup is exploiting the growing demand for independent energy providers and for more sophisticated and efficient solutions to home power and heating needs. It is growing rapidly as an independent energy supplier in the competitive UK market, and this line of business has evolved to become the company’s core operation, alongside distributing efficient home energy solutions. It is a growing favourite in terms of direct customers and is now the only recommended supplier of energy by Which? Magazine.”
Share price CHF2.65 Target price CHF4.80 Rating: Buy
“A leading provider of battery storage, Leclanché is well exposed to growth in stationary power storage applications, and it has strong competitive advantages in terms of its products. While the company has seen some revenue delays, it is gaining traction, and we think it has the ability to become a major player in the mid-term power storage market.”
Share price 47p. Target price 130p. Rating: Buy
“An Indian renewables developer, it has already built up a major portfolio of wind assets in India that are beginning to generate attractive cashflow. While funding has been expensive, the company is making progress on refinancing and looks set to continue to grow. It has a pipeline with great potential, and is also developing solar assets which the Indian government is strongly supportive of.”
OPG Power Ventures
Share price 63p. Target price 130p. Rating: Buy
“Another company focused on the Indian market, OPG has principally been a developer of coal-fired power generation in India, but is now moving rapidly into renewables. Conservatively managed, OPG has been cautious about over levering and has developed its coal-fired portfolio with this in mind. It has low debt compared to other Indian power developers, and we see OPG’s delivery and continued strong operations as demonstrating its credibility as a power developer and operator in the Indian market.”
Current price 2.4p. Target price 3.8p. Rating: Buy
“A developer of flexible generation in the UK, Plutus is developing a strong portfolio of assets aimed at taking advantage of growing demand to support renewable energy generation. Another business with a strong pipeline, demographics for the company are favourable, with the UK renewables market having already grown from 4% of total capacity in 2004 to 20% in 2015.”
Current price 88p. Target price 118p. Rating: Buy
“Windar’s proprietary technology can create significant gains in output from wind turbines and can be retrofitted to existing units. Its technology results in increases in output of between 1% and 4% for turbines which directly translates into increased revenue and profit for manufacturers. The business is now gaining commercial traction which should lead to much higher sales and, if it is seen as a critical feature, it could lead to Windar’s technology being adopted by many more turbine manufacturers.”
Good Energy Group
Current price 257p Target price 250p Rating: Hold
“A generator, purchaser and seller of renewable energy, it can compete in the independent energy space with lower churn and has shown good management of purchasing risk. “The main risk to the business is whether it can gain traction with its customer base – it currently has almost 240,000 customers, but the growth rate has slowed slightly. However, we expect a return to stronger growth following a period of investment.”
Are the UK Governments Plans for the Energy Sector Smart?
The revolution in the energy sector marches on, wind turbines and solar panels are harnessing more renewable energy than ever before – so where is it all leading?
The UK government have recently announced plans to modernise the way we produce, store and use electricity. And, if realised, the plans could be just the thing to bring the energy sector in line with 21st century technology and ideologies.
Central to the plans is an initiative that will see smart meters installed in homes and businesses the length and breadth of the country – and their aim? To create an environment where electricity can be managed more efficiently.
The news has prompted some speculation about how energy suppliers will react and many are predicting a price war. This could benefit consumers of electricity and investors, many of whom may be looking to make a profit by trading energy company shares online using platforms such as Oanda – but the potential for good news doesn’t end there.
Introducing New Technology
The plan, titled Smart Systems and Flexibility is being rolled out in the hope that it will have a positive impact in three core areas.
- To offer consumers greater control by making smart meters available for all homes and businesses by 2020. Energy users will be able to monitor, control and record the amount of energy they use.
- Incentivise energy suppliers to change the manner in which they buy electricity, to offer more smart tariffs and more off-peak periods for energy consumption.
- Introduce new standards for electrical appliances – it is hoped that the new wave of appliances will recognise when electricity is at its cheapest and at its most expensive and respond accordingly.
How the Plans Will Affect Solar Energy
Around 7 million houses in the UK have solar panels and the government say that their plan will benefit them as they will be able to store electricity on batteries. The stored energy can then be used by the household and excess energy can be exported to the national grid – in this instance lower tariffs or even payment for the excess energy will bring down annual costs significantly.
The rate of return on energy exported to the national grid is currently between 6% and 10%, but there are many variables to take into account, such as, the cost of battery storage and light levels. Still, those with state-of-the-art solar electricity systems could end up with an annual profit after selling their excess energy.
The Internet of Things
Much of what the plans set out to achieve are linked to the now ubiquitous “internet of things” – where, for example, appliances and heating systems are connected to the internet in order to make them function more smartly.
Companies like Hive have already made great inroads into this type of technology, but the road that the government plans are heading down, will, potentially, go much further -blockchain technology looms and has already proved to be a game changer in the world of currency.
It has already been suggested that the peer to peer selling of energy and exporting it to the national grid may eventually be done using blockchain technology.
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
Don and Alex Tapscott, Blockchain Revolution (2016)
The upshot of the government’s plans for the revolution of the energy sector, is that technology will play an indelible role in making it more efficient, more flexible and ultimately more sustainable.
4 Case Studies on the Benefits of Solar Energy
Demand for solar energy is growing at a surprising rate. New figures from SolarPower Europe show that solar energy production has risen 50% since the summer of 2016.
However, many people are still skeptical of the benefits of solar energy.Does it actually make a significant reduction in our carbon footprint? Is it actually cost-effective for the company over the long-run?
A number of case studies have been conducted, which indicate solar energy can be enormously beneficial. Here are some of the most compelling studies on the subject.
1. Boulder Nissan
When you think of companies that leverage solar power, car dealerships probably aren’t the first ones that come to mind. However, Boulder Nissan is highly committed to promoting green energy. They worked with Independent Power Systems to setup a number of solar cells. Here were the results:
- Boulder Nissan has reduced coal generated electricity by 65%.
- They are on track to run on 100% renewable energy within the next 13 years.
- Boulder Nissan reduced CO2 emissions by 416,000 lbs. within the first year after installing their solar panels.
This is one of the most impressive solar energy case studies a small business has published in recent years. It shows that even small companies in rural communities can make a major difference by adapting solar energy.
2. Valley Electric Association
In 2015, the Valley Electric Association (VEA) created an 80-acre solar garden. Before retiring from the legislature, U.S. Senate Minority Leader Harry Reid praised the new project as a way to make the state more energy dependent and reduce our carbon footprint.
“This facility will provide its customers with the opportunity to purchase 100 percent of their electricity from clean energy produced in Nevada,” Reid told reporters with the Pahrump Valley Times. “That’s a step forward for the Silver State, but it also proves that utilities can work with customers to provide clean renewable energy that they demand.”
The solar energy that VEA produced was drastically higher than anyone would have predicted. SolarWorld estimates that the solar garden created 32,680,000 kwh every year, which was enough to power nearly 4,000 homes.
This was a major undertaking for a purple state, which may inspire their peers throughout the Midwest to develop solar gardens of their own. It will reduce dependency on the electric grid, which is a problem for many remote states in the central part of the country.
3. Las Vegas Casinos
A number of Las Vegas casinos have started investing in solar panels over the last couple of years. The Guardian reports that many of these casinos have cut costs considerably. Some of them are even selling the energy back to the grid.
“It’s no accident that we put the array on top of a conference center. This is good business for us,” Cindy Ortega, chief sustainability officer at MGM Resorts told Guardian reporters. “We are looking at leaving the power system, and one of the reasons for that is we can procure more renewable energy on the open market.”
There have been many benefits for casinos using solar energy. They are some of the most energy-intensive institutions in the world, so this has helped them become much more cost-effective. It also helps minimize disruptions to their customers learning online keno strategies in the event of any problems with the electric grid.
4. Boston College
Boston College has been committed to many green initiatives over the years. A group of researchers experimented with solar cells on different parts of the campus to see where they could produce the most electricity. They discovered that the best locationwas at St. Clement’sHall. The solar cells there dramatically. It would also reduce CO2 emissions by 521,702 lbs. a year and be enough to save 10,869 trees.
Boston College is exploring new ways to expand their usage of solar cells. They may be able to invest in more effective solar panels that can generate far more solar energy.
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