The key to investing in the alternative energy market is getting in quickly, identifying where the best yields can come from and securing those sites fast, says Timothy Nelson, Head of Carbon and Sustainability Strategy at AGL Energy. A speaker at the marcus evans APAC Alternative Investments Summit 2010 taking place in Singapore, 27 – 29 October, Nelson highlights the alternative energy investment opportunities, and why adopting a long-term view is essential for success.
How is the alternative energy market attractive to investors?
Timothy Nelson: Last year USD 250 billion was spent on power generation equipment globally, with more than half of that on alternative energy sources such as wind, hydro and solar. Growth rates in these industries are between 50 and 120 per cent annually.
Consumers and government policies around the world are shifting. Policies are being implemented to increase the proportion of renewable energies, with several energy-intensive projects in Asia being constructed with a 100 per cent renewable energy requirement.
Where can investors make money in this asset class?
Timothy Nelson: The opportunities in the alternative energy market lie across the supply chain. If you look at the production of equipment, more investments need to be made. China for instance is seeing a boom in the volume of production capacity for solar photovoltaic energy.
The early mover advantage is where investors can increase their returns. The best sites available for renewable energy will be taken up progressively; with wind for example, the higher the wind speed, the better the output. The key is really getting in quickly. Identify early on where the best yields are going to come from, and secure those sites fast whether you are a direct or indirect investor.
What developments will influence the alternative class?
Timothy Nelson: There are two primary drivers. Firstly, government policy; Australia has recently passed a legislation of a 20 per cent renewable energy target, and China is a key driver of renewable investment through mandated policies around portfolio standards.
The second change revolves around technology; as we get more volume through solar photovoltaic production, prices will come down and the opportunities for retailing solar to customers will increase. Thus, the opportunities lie at both ends of the supply chain.
What long-term strategies would you recommend to investors?
Timothy Nelson: Investors need to adopt a long-term view, as the types of infrastructure in energy have long-term asset lives. Energy production systems have an asset life of at least a decade. In the case of a coal or gas fired power station, or a wind turbine, their lifespan is also over a decade. The absolute key to successfully analysing what the opportunities might be is to take that long-term view.
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For more information on investing in alternative energy, please visit www.sceptreinternational.com