[Global environmental conferences with cross-government support are helping build knowledge-based awareness and proactive action to gain traction for decarbonization and renewable power. These decarbonization efforts and the rapidly declining costs of renewable energy sources have been propelling a changing dynamic that will meaningfully impact the future of energy production and consumption across the world. Thanks to the technological progress already achieved over the past decade, renewable power is now the cheapest source of energy in most countries, according to the Forum for Sustainable and Responsible Investing.
There are massive multi-decade investment implications, risks, and opportunities in the monumental task of re-engineering our established energy system. But the global actions referenced above demonstrate how the burgeoning renewable energy industry is becoming a firmly entrenched movement backed by environmental facts, economics, long-term business strategy sense, and global alignment of government policies. Even the largest oil companies are investing in renewable efforts and technologies. While not a fully mature area, it is in process. Today already renewables are projected to provide 22% of U.S. generation in 2022 and 24% in 2023 per the U.S. Energy Information Administration (EIA).
To better understand renewable energy investment opportunities, we were introduced to Michael Cerasoli, co-head of the Renewable Energy Business at Eagle Global Advisors – an independent, registered investment advisor located in Houston, Texas. We asked questions to explore the global dynamics and underlying technologies at play and the role that investors can play on this intricate road to a more sustainable and cleaner energy future.]
Hortz: What used to be your pondering and motivation in the back of growing your renewables infrastructure funding methods?
Cerasoli: The pondering and motivation in the back of our renewables infrastructure funding methods have been reasonably easy, we known years in the past that this collision of 2 megatrends – the declining prices of renewable calories and extending world decarbonization efforts – gives a unprecedented multi-decade funding alternative for savvy traders. Factor is, maximum traders focal point at the high-risk “rising tech” shares and now not the house owners and operators of the renewable calories property themselves, which flies neatly beneath the radar but nonetheless delivers spectacular risk-adjusted returns.
Hortz: Are you able to give us extra main points explaining the scope of those two calories megatrends of decarbonization and the price of producing energy from renewable assets?
Cerasoli: The declining prices of renewable calories were vital and neatly documented, down more than 90% for sun and wind during the last a number of many years. This used to be accomplished basically by the use of public coverage, which continues to boost the bar with the passage of recent laws like the ones discovered within the Inflation Aid Act (IRA). This has created a virtuous cycle that we consider is not going to handiest boost up, however make financial new applied sciences (e.g., calories garage) which might be important to calories transition.
Hortz: What explicit funding automobiles and techniques have you ever advanced from those efforts that you simply be offering to traders?
Cerasoli: We lately introduced an energetic ETF (ticker: RNWZ) that provides traders a very simple method to faucet into the renewable calories infrastructure paradigm shift. We additionally be offering one by one controlled accounts as neatly, a method with a monitor file of neatly over 5 years.
Hortz: Now we have heard so much about sun, wind, hydroelectric, and nuclear, however what different applied sciences and spaces are growing within the renewables infrastructure enviornment?
Cerasoli: We consider calories garage would be the subsequent era to take a really perfect bounce ahead, whether or not or not it’s by the use of lithium-ion batteries or the improvement of inexperienced hydrogen. In reality, AES Corp and Air Merchandise lately introduced a $4 billion inexperienced hydrogen facility that would be the biggest in the US. The electrolyzer is predicted to be powered via wind and sun property, generating blank, carbon-free hydrogen that may be saved and ship reliability to grids expanding short of it.
Hortz: How do you weigh making an investment in incumbent calories corporations with renewables efforts vs more moderen startups or different standalone renewables funding choices?
Cerasoli: First off, we consider there may be room for each corporate to have the benefit of calories transition, a “emerging tide lifts all boats” state of affairs. That stated, we expect the bigger gamers are perfect situated to ship game-changing, utility-scale initiatives that can transfer the needle in a large approach for blank calories. Then again, as we have now observed numerous occasions through the years, small however sensible corporations can develop into marketplace leaders. It in reality is large open to all corporations at this time.
Hortz: Making an investment in this kind of abruptly growing house with new applied sciences, what are your due diligence and funding variety parameters for an funding choice?
Cerasoli: We’re basic traders with an in depth background in infrastructure making an investment. The important thing to choosing infrastructure shares in this kind of abruptly rising sector is stability sheet control and decreasing building menace, to call a couple of. We’re searching for corporations that aren’t handiest rising, however rising accretively, and that’s not one thing that simply occurs. Working out your corporations and the built-in renewable calories chain is vital to maintaining control groups in take a look at.
Hortz: How would you counsel that advisors place an calories infrastructure and renewables technique in consumer portfolios?
Cerasoli: Renewable infrastructure gives a singular aggregate of enlargement and source of revenue, if executed proper. This will likely oversimplify issues, however we consider traders have compatibility investments into two classes, “core making an investment” and “menace making an investment.” The majority of an investor’s wealth is most often in “core,” which is characterised via protection and/or solid enlargement. Renewables infrastructure suits the “core” profile to a tee, given its solid money go with the flow profile supported via long-term contracts and the sturdy credit score high quality of its contracts.