By Gerard Wynn
LONDON, June 15 The shale gas revolution has
allowed the United States to tap vast new reserves of gas and
oil, but last year's Fukushima nuclear crisis may unleash an
There are conflicting signals for green energy investing.
On the one hand, global non-hydro renewable energy
generation has grown by 10 percent annually over the past two
decades, while investment reached a new record last year, and
banks Goldman Sachs, Citigroup and Bank of America
recently endorsed the business case.
On the other, a post-recession pullback in government
support has combined with innovation in drilling technology to
allow exploitation of oil and gas trapped in shale rock.
Such unconventional fossil fuels are up-ending U.S. energy
trade and independence and the economics of coal and wind and
solar power at a time when cash is short.
In Japan and Germany, however, the energy picture has been
re-shaped instead by the 2011 Fukushima disaster, which
triggered a massive shutdown of nuclear power in each.
They have managed, so far, through lower energy consumption.
BP energy data on Wednesday showed that Germany and Japan
cut energy use in absolute terms more than any other country
last year. In percentage terms, they each cut primary energy
consumption by 5 percent compared with 2010.
To be clear, there were exceptional one-off circumstances
which enabled this without energy rationing: in Germany, the
continuing eurozone crisis and a mild winter cut demand, and
there was a downturn in Japan following the massive earthquake
Nevertheless, under its post-nuclear, "Energiewende" (energy
transition) Germany is developing an alternative system
including efficiency, plus massive, decentralised, renewable
power and energy infrastructure investment to, for example, link
north and south.
Its nuclear closures were expected to hike electricity
prices, but these have been capped when the weather favours the
country's massive solar or wind power.
More variable power prices could be a forerunner of a new
kind of market, where centralised and inflexible plants,
including new nuclear, cannot compete in a more dynamic,
connected, modular approach to energy generation.
As the International Energy Agency said on Monday, in its
"Energy Technology Perspectives" report, "The most important
challenge for policy makers over the next decade will likely be
the shift away from a supply-driven perspective to one that
recognises the need for systems integration".
PROJECTS VERSUS STOCKS
That may not comfort investors in the short-term targeting
the green energy sector, where listed stocks are largely solar
module and wind turbine manufacturers whose value has plummeted
as a result of global over capacity.
Consultants Mercer last year anticipated a rising allocation
to low-carbon assets.
They argued that governments over time would deal with the
threat of climate change with policies which hurt fossil fuel
They also expected innovation in low-carbon energy
technologies to undermine oil, coal and gas.
So far, the reverse has been true in both cases.
Governments have slashed support for renewable energy, with
one eye on stretched, recession-hit consumers, while drilling
innovation has allowed the United States to tap new,
unconventional fossil fuels.
For investors, the knack is to target bonds and private
equity in renewable energy projects and developers, which have
benefited from falling equipment prices, rather than listed
manufacturers, plus stocks in efficiency and grid technologies.
London-based Impax Asset Management is one of the
best-performing environmental fund managers, and its largest
fund, Impax Environmental Markets plc, has prioritised
efficiency over renewable energy.
As of end-May, its largest invested sector was energy
efficiency, with 31 percent of assets, followed by waste
management (25 percent); water and pollution control (24
percent); energy supply (15 percent); and environmental support
services (5 percent).
In the long-term, the Mercer report will prove correct, as
countries carry through plans for hundreds of gigawatts of new
renewable energy capacity, lifting stocks after the present
Earlier this week, Citigroup analysts painted a bright,
long-term future for the clean technology sector: "Annual new
investment in clean tech has been around $250 billion for each
of the last two years, and this figure is set to grow
Goldman Sachs recently set itself a target for $40 billion
investment in such companies over the next decade.
"The clean tech industry is expected to be a rapidly growing
market and one that we believe is at a momentous point in terms
of the expansion of technologies that will help diversify energy
sources and improve the environment," the bank said in its
Environmental, Social and Governance Report.