Highlights from 2023

Climate anxiety is very real, and while 2023 was the warmest year on record, according to the World Meteorological Organisation, these good news stories from throughout 2023 prove there is hope for our planet. We welcome the consultative approach taken by The Australian Federal Government and the release of a consultation paper on its sustainable finance strategy. The Strategy proposes a range of measures to underpin the development of Australia’s sustainable finance markets and is structured around three pillars: Improving transparency on climate and sustainability Enhancing financial system capabilities Strengthening Australian Government leadership and engagement   US coal powered electricity generation continued to decline in 2023, with generation of 669 gigawatt-hours barely one third of 2010 levels.  According to government data released, Bloomberg New Energy Finance (BNEF) forecasts a continued declines in coal powered generation in 2024, at which point solar and wind generation will exceed coal for the first time. More Positive stories from 2023 Good News Stories You Didn’t Hear About in 2023 From wind-powered islands to urban forests As we head into the new year, there are several factors that we will be keeping a close eye on: Drivers: Political engagement, higher temperatures, and carbon emissions. Climate: Remains a priority focus, and governance is growing. Opportunities and risks of artificial intelligence (AI): A myriad of companies will take advantage of the emergence of new tools and trends offered by AI with an increased focus on responsible AI and good governance. Risks: New (and old) risks, including wars, inflation, and the upcoming US & UK elections.

Entering the next phase of green growth

Despite financial volatility, the green economy continues to expand and diversify steadily, and is becoming an important source of economic growth, jobs and energy supply. It has also emerged as a critical geopolitical consideration. The FTSE Russell 2023 Report, provides a holistic picture of the green trends in the global equity market, green equity performance, and the geopolitics of green.

According to this report, as a stand alone sector, the green economy is now the fourth largest sector in global equity markets, with a combined market capitalisation of US$6.5 trillion. It recently surpassed Banks and is now materially bigger than Energy (including Oil & Gas) and the Retail sectors.

Green revenues for listed companies are on track to exceed US$5 trillion by 2025, which is double the size since the conclusion of the Paris Agreement in 2015.  The market capitalisation of the green economy is approaching 10% of the equity market.  Acknowledging to shift the global economy onto a 1.5°C trajectory, green growth will have to further substantially accelerate approximating 20% of global equity markets by 2030.

FTSE Russell 2023 Report

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2023 Ethical Advisers Co-op Annual Report

We are proud to be a part of the recent launch of the Ethical Advisers’ Co-operative’s fourth Annual Report, which showcases’ the important efforts the Co-op has made throughout 2023. The report highlights the engagement activities, ethical fund ratings and member events that are lifting the finance industry and spreading the word to more investors.

Access the Annual Report

 

 

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Battery storage – the backbone of a renewable energy future

Renewable energy and electrification have the potential to reduce energy-related CO2 emissions by 75%, which is necessary to keep global temperature increases “well below” 2°C.  Can the infrastructure cope?

Wind and solar energy sources are variable and decentralised, which poses significant challenges for the existing electricity network that was designed around stable and centralised power generation sources.

What makes a grid smart?
Some of the solutions to these challenges to the grid can be found in the Funds we invest in, including smart grid technology, battery storage solutions, electric vehicle (EV) charging, and semiconductor technology.

A smart grid for example is fitted with information and communications technologies (ICTs) to enable a real-time, two-way communication between suppliers and consumers. This creates a more dynamic interaction in energy flow, which helps to deliver electricity more efficiently and sustainably. Smart grid technologies like semiconductor technology enables wireless communication and the Internet of Things (IoT).  The connectivity they provide in smart meters, EV chargers, and solar panels is a key enabler of communication with the grid.

The role of storage
The latest Quarterly Energy Dynamics report from the AEMO (Australian Energy Market Operator) reveals that batteries took a 50% share in the provision of key services to the grid, up from 38% a year earlier.

As the grid decarbonises and becomes more complicated, struggling to meet the demand for electricity, storage is required to balance this demand and supply and maintain the integrity of the grid. The energy transition will require a mix of technologies, as there is no single perfect form of energy storage.  Some deep storage (providing supply during prolonged system stress, supply disruption or seasonal variability) is required for ‘dark and still’ periods when solar and wind output is less than is demanded for an extended period.

According to AEMO modelling, building enough wind and solar to meet the energy needs is likely to be more efficient, on estimated technology costs, than building less wind and solar but more seasonal storage. The task now is to integrate these solutions into the existing infrastructure to ensure a smooth transition to renewable energy and electrification.

In our next newsletter we will look at these ‘deep’ storage solutions – Hype vs reality.

source: Pengana WHEB, Betashares Insights, AEMO

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