It’s an exciting time to be an energy investor. Tesla, the electric vehicle-to-battery maker, has become the only non-tech firm to be worth more than a trillion dollars. And renewable companies were among the few stocks to grow during the coronavirus pandemic.
The clean energy sector is packed with high-growth opportunities and has plenty of safe bets in the shape of a growing cadre of corporates dubbed ‘renewable supermajors.’ If you’re looking to invest, it’s hard to know where to put your money first.
In October, the analyst firm Wood Mackenzie confirmed that global energy storage market capacity was set to triple this year, growing to 12 GW and 28 GWh. That’s right: a threefold market increase in a single year.
This growth puts energy storage ahead of the fastest-growing industries of 2021. And it is set to continue, with Wood Mackenzie forecasting 1 TWh of total demand between 2021 and 2030, an almost 36-fold increase on current installed capacity.
The outlook for green hydrogen is equally bright. Unlike energy storage, this low-carbon fuel is being lined up for government support around the world and has been slated for a much wider range of applications than batteries can address.
The nascent green hydrogen market is also starting from a much lower base than battery storage. Although the world consumed around 90 million metric tons of hydrogen in 2020, this was almost all produced via steam methane reforming, a carbon-intensive process.
Green hydrogen production will ultimately need to cover almost all that demand, and massive extra supplies will be needed to decarbonize sectors such as steelmaking and shipping.
As a result, the International Energy Agency estimates global demand for hydrogen will double by 2030 and grow sixfold by 2050.
Beyond supply and demand dynamics, a big draw for investors should be the fact that hydrogen is central to the decarbonization plans of the major oil companies. In short, this is an industry that barely exists and is already too big to fail.
And talking of failure, here’s the thing that’s most attractive about battery storage and green hydrogen: these industries are essential for the energy transition.
Without them, there is no path to net zero, no way to decarbonize the energy system and no chance of avoiding a climate breakdown and its attendant impacts on the economy. If these industries do not continue to grow, there is a chance that all other investments could suffer.
Naturally, the fact that energy storage and green hydrogen come with the equivalent of a cast-iron guarantee of growth does not mean all the companies in these industries are destined for success.
Investors will need to conduct due diligence and select winners with care, just as they always have. But the underlying fundamentals could not be stronger, and companies with great growth potential are not hard to find.
At Pacific Green, for example, we have perfected a low-risk, high-return business model for energy storage that involves developing projects in markets such as the UK, where there is a boom in demand for battery plants and a range of revenue streams to tap into.
For a battery project such as the 100 MW system we are building at Richborough Energy Park in Kent, UK, we believe we can make £9 million in revenue a year. At a purchase price of £15,000 per MW of installed capacity, the return on investment is significant.
And we’re just getting going. Speak to us now if you’d like to be a part of this journey.