28 July 2015

New Power – The rise of new energy amid a challenging environmental outlook

No longer can we pave paradise and put up a parking lot, as the song once sang. As rapid urbanisation continues to present some unique environmental challenges, there’s no denying that climate change is now at the forefront of global corporate responsibility. As the world’s attention turns to Paris later this year for the UN Summit on Climate Change, the question on everyones’ minds will be around how governments and companies can provide solutions to the questions posed by an increasingly challenging environmental outlook.

The issue of climate change continues to dominate news headlines and political agendas. There’s no denying that industrialisation and urbanisation have brought about some unique environmental challenges.

No longer passed off as inconsequential, the increasing importance of addressing climate change has become a global responsibility. The emergence of the rising middle class across Asia is raising aspirational demand across a number of categories, and with it a rising social intolerance of pollution and heightened awareness of environmental concerns.

Attention will be turned to Paris late this year where close to 200 nations will meet for the UN Summit on Climate Change. With current commitments set to expire in 2020, the Summit aims to achieve a new set of legally-binding global targets. Amongst the smorgasbord of challenges, one that’s going to be particular harder to agree on is around the provision of financial assistance to less developed countries for investment in clean technology to cut gas emissions.

But if a new binding agreement ensues, it will be a catalyst for further government policy initiatives, likely acting as a strong incentive for further significant investment, like improvements in solar and wind technology for example.

Solar forms one part of the renewable energy story in Australia and throughout the globe. The improvement in the efficiency of solar panels combined with lower costs has prompted a broad take-up.

Already being labelled as a potential ‘game changer’, we’re seeing the effective use of energy storage as a way for businesses to use larger-scale renewable energy sources more practically and which would help lower greenhouse gas emissions.

Companies that are seeking to provide solutions to the questions posed by a more challenging environmental outlook stand out as interesting investment candidates. While still in its early stages, what does seem clear is that the household battery storage market could become quite significant, especially as costs are reduced. The overall energy storage market is expected to grow rapidly over the next few years, potentially reaching the $1.5 billion mark by 2019.

Given the installed base of residential solar power in Australia, the adoption of household battery storage may happen at a faster pace than is currently anticipated. Battery storage may also become a useful tool for the broader power industry to incorporate renewable energies, enabled by smart grids and the emergence of micro-grids.

The more traditional energy generation industry may also be able to better manage challenges such as peak demand in an environment that offers greater flexibility.

Important information: The content of this publication are the opinions of the writer and is intended as general information only which does not take into account the personal investment objectives, financial situation or needs of any person. It is dated June 2015, is given in good faith and is derived from sources believed to be accurate as at this date, which may be subject to change. It should not be considered to be a comprehensive statement on any matter and should not be relied on as such. Neither Zurich Australia Limited ABN 92 000 010 195 AFSL 232510, nor Zurich Investment Management Limited ABN 56 063 278 400 AFSL 232511 of 5 Blue Street North Sydney NSW 2060, nor any of its related entities, employees or directors (Zurich) give any warranty of reliability or accuracy nor accept any responsibility arising in any way including by reason of negligence for errors and omissions. Zurich recommends investors seek advice from appropriately qualified financial advisers. Zurich and its related entities receive remuneration such as fees, charges and premiums for the financial products which they issue. Details of these payments can be found in the relevant fund Product Disclosure Statement. No part of this document may be reproduced without prior written permission from Zurich. KJUC-010361-2015
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