We spend a lot of time writing about companies on The Armchair Trader which are active in the area of clean energy, or are involved in producing the resources needed by this sector. But we are not a climate investment or green finance site per se.
The volume comes from the fact that we see this sector as one of the most exciting to invest in during the next 20 years. It represents a change in the way the human race produces and consumes energy which will penetrate to every level of our lives. It is comparable to the Internet revolution in the 1990s and indeed to the mass industrialisation of the planet in the 19th century., aka the Industrial Revolution.
Picking Amazon as an investment in the mid-1990s was not easy. I was working as a financial journalist then and there were hundreds of possible investment opportunities in the dot-com sector at the time, most of which never survived the crash which followed in 2001. Today we are sifting through lots of opportunities in new energy tech already and there will be more to come. But which are the survivors and more importantly which will be the future titans?
New means of private finance may be needed
Unlike the Internet revolution, however, the green energy revolution will likely require new ways of financing this technology. Much of it is more expensive to test, build and deploy than even an Amazon was. Some of this technology has yet to be proven, but we can see that it will be needed. Many investors will make millions in this sector, if they get their picks right.
Some of the biggest and canniest investors on the planet, for example, are backing Breakthrough Energy, a venture fund that is providing finance for the sort of technology that can find it hard to raise long term investment. Among Breakthrough Energy’s backers are Bill Gates are Jeff Bezos. The technologies they are supporting include green hydrogen, carbon extraction and safe storage, energy storage, and alternatives to jet fuel for the aviation industry.
Gates has just announced the launch of Breakthrough Energy Catalyst, an initiative that is designed to support the commercialisation and scale up of these key technologies.
“Most green technologies are still more expensive than whatever they’re trying to replace,” Gates explains. “They don’t do the job better (other than contributing less to climate change, of course) and in many cases, they do the job worse.”
Making green energy tech commercially viable
Catalyst is setting out to make these technologies cheaper, viable, and primed for mass market adoption. Gates says that he recognises speed is of the essence. He points out that it took 50 years to get solar power technology to where it is today. The new phase of this energy revolution simply does not have 50 years to hit its targets.
This is really where Catalyst and other programs like it will make a difference. Catalyst will start funding projects next year. It is partnering with the European Commission and the European Development Bank to mobilise over $1 billion in the next five years. It will help to build large scale demonstration projects and seek to lower the costs of these pioneering new technologies.
Part of this program will also include the introduction of a tool, which Catalyst is developing with CDP (a non-profit working on carbon emissions disclosures) to measure the impact of investments in these areas, and how they will help in bringing down carbon emissions. This is scheduled for launch at the UN COP26 conference in Glasgow this autumn. It addresses a key new area of reporting that we expect will come to fore for many longer term investors in green technologies: the need to also evaluate how a company or its technology is having a material impact on saving the plant.
While smaller companies that are in the process of developing new technologies do not have the pockets of a Gates or a Catalyst, their contribution is still going to be valuable.
Readers of The Armchair Trader can expect us to continue to highlight new and innovative opportunities in this exciting space as they emerge. They many not necessarily be companies with the prospect of short term profits, but who knows, among them may be the giants of the future energy revolution?
