The 'emerging' investment opportunities in UK renewables
A decade ago, renewable energy in the UK would have conjured up images of two things: wind turbines and solar panels, since these were the main focus of media attention, government subsidies and investor inflows.
Ten years later, the investment universe for this sector has thankfully come on in leaps and bounds, providing excellent opportunities for investors to derive a stable income stream from a diversified array of renewable infrastructure assets.
For example, anaerobic digestion (AD) technology is a growing sector within the UK energy market, using household food waste to produce clean biogas which can be used to power anything from delivery trucks to central heating.
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The fundamentals of this fermentation process have actually been established for many decades, but it is still considered relatively under utilised and therefore has huge potential for growth.
Some key attractions for investors here include low technology risk, low exposure to merchant price fluctuations (gas/electricity) and higher (RPI-linked) returns than mainstream green wind or solar technologies.
To provide a further boost to the long-term momentum of AD technology, the UK government has pledged to work towards eliminating food waste to landfill by 2030.
With food waste estimated to be 10.2 million tonnes annually, there is clearly no shortage of ‘raw material' to feed the UK's growing number of AD plants.
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Another emerging technology we are positive on is co-located battery storage, having recently completed on a Yorkshire-based project with a 1.2 megawatt capacity.
Battery storage complements the UK's range of existing green energy initiatives, helping to even out the peaks and troughs of demand versus supply in the market. Battery storage projects can absorb or release excess power when needed with little notice.
Coupled with the fall in lithium prices, an important component in battery storage manufacturing, there are many reasons to consider further investment in this technology, providing additional revenue opportunities across many of our current power generating assets.
Chris Holmes is a co-investment adviser at JLEN
Bull Points
• Investment opportunities in flexible generation to complement existing renewable energy generation
• Both consumer and industry sentiment shift towards low carbon energy sources maintains long-term momentum
Bear Points
• Continuing reduction in cost of build out of renewable infrastructure creates challenge to investment timing decisions
• Reducing subsidies create increasingly complex energy markets to contract into
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