Swiss & Global manager Roberto Cominotto issues warning on short-term investments in renewables

Roberto Cominotto, manager of the JB Energy Transition Fund, has warned that short-term investments in renewable energy should be handled with care.

The future of the energy industry lies with renewables, however, from an investment perspective there are limited short term opportunities. Neither solar nor wind power are currently attractive with both industries suffering excess capacity, with a flood of cheaper products coming from China.

Wind turbines and solar panels are seeing huge price falls. The prices for solar panels slumped by more than 50% in 2011 and by a further 30% in 2012. We believe that this price collapse will have a positive effect on renewables in the medium and longer term, because this is the only way for renewable energy to become competitive over traditional power sources. In some countries, including Germany, solar power already costs the same or even less than domestic electricity.

A new business model for solar power has begun to emerge in the US. Solar installations are increasingly being leased, allowing homeowners to forgo the huge cost of installation. Another new trend is the switch from feeding solar power into the grid towards more on site usage. Battery storage systems are available for this type of installation.

Attractive investment options in the energy sector are currently found in companies that benefit indirectly from the growth of renewables, for example companies that plan and build power grids and supply them with components. In many countries power grids are already at capacity limits. Expanding the grids is therefore at the top of the agenda when it comes to the energy transition. We believe there is an interesting niche in the operation of wind farms. They benefit from low prices for wind turbines and the strong demand from some emerging markets, and are also favourably valued.

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