All I want for Christmas is some renewable energy infrastructure

By Emily Church

With COP26 out of the way, it is unsurprising to see the investment world getting back down to the business of making money for their investors. Encouragingly, assets continue to flow into ‘green’ sectors as investor awareness of ESG goes mainstream and troublesome areas such as categorization, taxonomy and measurement begin to move, albeit creakily, towards a resolution.

It was therefore very pleasing to see an industry survey last week from the AIC which tipped renewable energy infrastructure (REI) as the top performing asset class for 2022. For anyone living under a rock for the past 5 years, renewable energy infrastructure includes anything that facilitates the production, storage, transportation or adoption of renewable energy, and (if that rock you were living under also had no phone signal) renewable energy sources are sorely needed if we are going to tackle the global economy’s carbon addiction and avoid the most severe consequences of global warming. There may be naysayers out there who believe that as soon as a sector becomes popular, then that is the exact time to ditch it. To those people I would say: ‘bah humbug!’

The UK government has pledged that by 2035, 100% of the UK’s power will come from renewable sources. Even if this target is missed, it creates an enormous opportunity for new REI technology to be developed and scaled up over the next decade – as well as the expansion of existing solutions. Most people will be familiar with the usual suspects in this category; wind, solar and hydro power. Excellent progress has already been made in the UK with new records being set every year for power consumption from renewable sources – according to independent climate thinktank Ember, the UK’s renewable electricity generation outpaced its fossil fuel generation for the first time in 2020.

We’re also seeing innovations previously considered ‘niche’ moving into the mainstream. For example, anaerobic digestion plants which use waste (e.g. food or animal waste) to produce biogas, a fuel which can be used by converted HGVs, thereby reducing their annual greenhouse gas emissions by up to 80%. Given that the transport sector is one of the heaviest polluters in the UK, it seems obstinate to ignore a solution that is right here and ready to use. Luckily, many savvy businesses have already recognized this and have started to convert their transport fleets (Hermes and Royal Mail are some of the early adopters) but there is still a steep mountain to climb, meaning that prospects for growth are good.

So where else can the sector go? Well, the sky is the limit – quite literally, since the aviation sector in particular is proving very difficult to decarbonize, with no real solutions currently on the table. As the sector evolves it also becomes apparent that we are not just talking about energy – we are also talking about water management, food production, construction and waste management to name but a few ways to diversify.

Infrastructure provides the rails upon which we keep our lives on track; environmental infrastructure can do that too, but without destroying the planet. I know which one I’d like Santa to put in my ISA this year.