Whitney Voûte, head of investor relations at US Solar Fund
Last year was the strongest year for renewable energy deployment in the US, and 2021 is on track to surpass this record. In the first three months of 2021, the renewable energy industry added 40% more clean energy than in the first three months of 2020. The trend and movement towards sustainable energy sources is only set to increase in the second half of the year and beyond, bolstered by US President Joe Biden’s demand for a 50-52% reduction in net greenhouse gas pollution by 2030. Solar photovoltaic (PV) generation will likely play a key part in the energy mix.
Excellent conditions for PV power generation, an established market for long-term power purchase agreements, and supportive regulatory and policy frameworks make the US attractive for investors seeking sustainable income streams.
With ESG interest only increasing, and COP26 on the horizon, climate change will continue to be on investors’ minds. Increasing attention will only support and strengthen the already proven, attractive solar sector, drawing more capital to accelerate the development of utility scale solar power and other renewables.
Calum Bruce, investment manager of the Ediston Property Investment Company (EPIC)
Retail parks were unjustifiably written off after being lumped together with high street stores and shopping centres under the retail property umbrella. The sector was oversold prior to Covid-19, with logistics hailed as the winner of a new world order. However, we believe the potential of retail parks remains under-appreciated, and demand has picked up. The retail park is well suited to the post-Covid world, allowing shopping to be done in a safe and socially distanced way. In fact, retail parks have been more resilient to the pandemic than other sub-sectors of the market.
With valuations bottoming out and rents rebasing, now is an opportune time to buy into retail parks. Our conviction is supported by Savills, which has tracked the outperformance of retail warehousing compared to other retail segments since 1980, and highlights the sub-sector’s competitiveness through the rise of online retail and the Covid-19 pandemic. The conclusion reached by Savills is there is a significant investment opportunity in retail warehousing, as it has repriced in line with the wider retail market.
It has taken a pandemic for investors to differentiate between retail sub-sectors, but we are now more convinced than ever we are on the right side of change. Bricks-and-mortar retail is changing, not dying. With the trust offering a 7.3% yield at a 19% discount to NAV, investors are essentially being paid to wait for this to play out.
Ben Guest, fund manager of Gresham House Energy Storage and managing director of Gresham House New Energy
Renewable energy investing is no new phenomenon, but opportunities are emerging to invest in this theme in new ways. The first wave of renewable investments was in government-subsidised solar and wind power projects, providing investors with income visibility and which, as investors have become comfortable with these technologies over the last decade, has resulted in low discount rates and high valuations.
Today, investment opportunities are emerging in energy storage systems (ESS), which are the most flexible and proven way to harness excess energy and address supply-demand imbalances. Battery storage revenues are derived either from contracting with the National Grid to provide real-time balancing services, or by trading to capture spreads between intraday highs and lows in power prices. This area offers investors an attractive dividend opportunity and the potential for capital growth.
The rise of the utility scale ESS is tied to the rise of renewable power generation. In the UK, we expect ESS capacity needs to rise tenfold to match the supply of offshore wind power coming onstream over the next few years, making it an important future ESG-orientated investment.
