A maturing industry and advancing technology is making for a more competitive global renewables market, claims Unigestion’s private equity principal Eric Marchand.
The $25.9bn-managing institutional investor has recently finished deploying an environmental sustainability vehicle, and is now investing capital across the renewable energy industry from a “dedicated mandate”.
The investor is set to increase its exposure in the short term, and is currently reviewing opportunities with a sustainability theme.
Now, with renewables becoming increasingly competitive, and a rise in cleantech investing after a two-month slump, Marchand believes that the investment space is likely to continue evolving.
He said, “Two common themes we witnessed are the progressive shift in policies and vivid signs of a maturing industry. Feed-in-Tariff systems are progressively giving way to auctions, a transaction which we believe stems from renewables’ increasing competitiveness versus other energy generation options.”
Marchand claims that these two themes have been driven by technological advances by entrepreneurs in the industry, and more understanding from governments on a global basis.
“Renewables’ competitiveness has been supported by significant leaps in technologies’ efficiency, directly impacting LCOEs, but also by the industry’s improving and deepening development track record, which has also markedly reduced the inherent risk of operating and investing in the space.”
The sector’s increasing popularity is causing a “gradual contraction” of returns, says Marchand, much like the rest of the private equity industry.
The investment space is not without its drama however, and President Trump’s pivot away from the renewable space could have long-term effects.
Marchand is still upbeat on the space though, and believes that by walking away from the Paris accord, leadership was “definitively handed to China”.
“I struggle to see how this pivot will meaningfully slow this industry’s progression. Unlike under the Bush administration, renewables’ competitiveness versus traditional sources of energy is indisputable, hence I do believe the market will naturally encourage their development in spite of a defiant administration.
“In the long run, the main drawback for the US will potentially be having wasted valuable resources in supporting energies from the past at this critical juncture”, added Marchand.
Despite rising competition and an increasing amount of capital flowing into the space, renewables is here for the long-term, and in many parts of the world, it is still in the early stages.
Unigestion will capitalise on this, and continue investing globally.
Marchand said, “From a geographic standpoint, I would identify countries and regions where renewables development is still in its infancy and needs a boost [as good future investments]. Typically this will translate into a favourable regulatory framework to drive higher returns.”
Eric will be speaking at the 8th annual AltAssets Renewable Energy Investor Forum. You can find further information about the event here.
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