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Aegon AM: Reducing gas dependency key to solving energy crisis – but won’t fix short-term problems

Colin Dryburgh, co-manager of the Aegon Sustainable Diversified Growth Fund, looks at the energy crisis and where renewable energy could fit into the long-term solution on the back of Ofgem’s £700 price cap hike: 

“Higher energy prices will disproportionately impact lower income households and measures to ease this pain should be welcomed. Growing renewable energy production will also reduce Europe’s dependency on imported gas. However, this will not be a short-term fix and storage technology will need to be developed to deal with renewable energy intermittency – the sun does not always shine and the wind does not always blow.

“Growing wind and solar capacity around the world will need to be financed by significant levels of investment and this will provide investors with many opportunities. Ultimately, green hydrogen will play a major role in terms of energy storage and powering some forms of transport.

“It is, however, still early days in terms of hydrogen-related infrastructure rollout. Hydrogen-related investments are very high risk, but the growth opportunity is significant.

“Europe is still highly dependent on the gas that it imports from Russia. European gas stocks are currently low by historic standards and prices are high due to shortages. Major supply disruption from Russia could have significant economic consequences.

“Current political tensions between Russia and other countries are intertwined with the European Commission’s decision on whether to approve the Nord Stream 2 gas pipeline, that is intended to double the amount of gas flowing from Russia to Germany and bypass the traditional route via Ukraine.”

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