MARKET TRENDS – MAY 2016 Renewable energy: a green opportunity?


[music] Hello and welcome to Market Trends on investment opportunities in green or renewable energy. I’m Anne Perreault, and I’m here with Louis Wermenlinger. Louis, before explaining why you think renewable energy is a good investment opportunity, could you give us a quick run-down of the industry? Sure! Renewable energy comes from inexhaustible sources including the sun, water movement, wind, and underground heat. They have a small environmental footprint or none at all. That makes them different from first fossil fuels like oil, gas and coal, whose carbon dioxide emissions cause a greenhouse effect—the main cause of global warming—and second nuclear power plants, which can be dangerous to people in the event of a breakdown. The major industry players are equipment manufacturers, builders, producers, distributors, and installers.

Despite the industry’s recent strong growth, fossil fuels are still the dominant energy source, and many specialists believe they won't be replaced so fast. How can you justify investing in it? You’re right. Apart from hydroelectricity, renewable energy currently accounts for just a small share of global energy production. In 2014 hydroelectricity production was 6.8% of total production compared to 2.5% for other forms of renewable energy like solar, wind, geothermal, and biomass. But the later have been growing much faster than fossil energy, at 18% per year between 2009 and 2014 versus 1.9%. Growth in coming years will continue thanks to the greenhouse gas reduction targets most countries have agreed to and also to substantially lower equipment costs. For example solar panel prices have dropped almost 70% and wind turbine prices 30% since 2010. The International Energy Agency predicts that additional renewable electricity production capacity will exceed 700 gigawatts (GW) between 2015 and 2020.

A large part of this additional capacity will come from unconventional sources— mainly solar panels and wind farms. In response to the urgent need to slow global warming, the share of fossil energy will decline slowl y but surely. That’s quite compelling. How can people invest? What are some examples? Lots of public corporations worldwide are active in a number of industries tied to renewable energy. For example, Boralex, Innergex and Brookfield Renewable Energy Partners own hydroelectric dams and wind farms and they are listed on the Canadian market. In the United States, Solar City designs, distributes, and leases solar power systems for commercial and residential users. Vestas is a wind turbine manufacturer in Europe. Investors who want to get in on the ground floor yet avoid the risk of being too concentrated in a limited number of securities should consider exchange-traded funds (ETFs) available on the U.S. market that replicate an index consisting only of businesses in the sector. One of them, the Market Vectors Global Alternative Energy ETF, holds 32 companies around the world.

Thank you, Louis. It's definitely an industry to keep an eye on! Thanks for being with us. We look forward to welcoming you to a ne xt episode of Market Trends. [music].