On to more renewable energy

April 2022

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Greenhouse gases are the main culprits of global warming. Reducing our dependence on fossil fuels is now more necessary than ever. Investments in renewable alternative energy sources such as solar, wind and hydropower all give this transition a boost.

Philippe Delfosse, Investment strategist KBC Asset Management

What is alternative energy?

Solar, wind and water are just some of the alternative or renewable energy sources available. We can use this energy without negatively impacting the environment or future generations.

1. Promising prospects in the short and long term

Our current energy system consists of a number of centrally located sites where electricity is continuously generated from fossil fuels, but this is now changing.  Electricity is increasingly being generated locally from renewable energy sources, and this production is less reliable.

A major challenge going forward will be ensuring that this local, variable electricity production keeps up with increasing electricity consumption. Industrial energy storage solutions are a necessary part of an effective and sustainable electricity network.

The transition to renewable energy sources and improved energy storage capacity offers a number of opportunities:

Solar energy
  • The demand for installations remains strong, with solar panels becoming cheaper and more efficient
  • Proper storage capacity will be increasingly necessary in order to cover peak times when there is little sunlight
Wind energy
  • As part of the REPowerEU programme, Europe wants to improve access to permits for on- and offshore wind farms
  • The offshore market is expected to grow by more than 20% by 2025
  • New wind turbines are also being built on land
Regulated utilities
  • A great deal of investment is needed in network infrastructure and smart grids in order to support the growth of network operators, which could also benefit suppliers
  • Storage capacity must be adapted to suit irregular energy production
  • Utility companies active in hydropower, wind and solar parks will experience faster growth due to significant investment in renewable energy, which means they indirectly benefit from rising electricity prices 
Green hydrogen
  • Fuel cell manufacturers and electrolysis plants are putting in strong performances
  • As the need for flexibility in the electricity grid increases, there is also a greater need for green hydrogen to serve as a means of energy storage 

2. The energy transition is back on the radar

Energy prices have risen sharply as a result of the war between Ukraine and Russia, making our dependence on this energy painfully clear once again. 

Thanks to the REPowerEU plan, Europe is taking steps to become less dependent on Russian gas. Past initiatives such as the European Green Deal, the Paris Agreement, infrastructure plans in the US and the drive towards a climate-neutral economy are all hot topics once again.

3. Valuation offers opportunities

  • If oil and electricity prices remain high, that would be good news for renewable energy, smart electricity networks and energy meters
  • Following the correction in 2021, the alternative energy sector can no longer be labelled expensive
  • The earnings outlook for these companies makes them an attractive option 

Did you know?

… that a single revolution of a wind turbine provides enough electricity for a Tesla Model 3 to drive more than 150 kilometres? (Source: Merrill Lynch)

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Editing ended on 24 March 2022.

This document is a publication of KBC Asset Management NV (KBC AM). The information in it can be changed without notice and offers no guarantee for the future. Nothing in this document may be reproduced without the prior, express, written consent of KBC AM. This information is governed by the laws of Belgium and is subject to the exclusive jurisdiction of its courts.