Getting excited about the mass adoption of Light Emitting Diodes (LEDs) seemed a perfectly reasonable response to projections for the market in 2013 until a colleague pointed out that he could think of little else that would as surely send him to sleep. The comment reminded me of the quote from Scotland’s national bard Robert Burns. In the final verse of his ode ‘To a Louse’ he appeals for some power to give us the gift ‘to see ourselves as others see us’. It may indeed be that my colleague sees me as an energy efficiency nerd…
But if there is a time to be ‘nerdish’ about energy efficiency, then it is now. Even the UK’s Prime Minister David Cameron, who until now has kept his interest well-hidden, confessed his enthusiasm for energy efficiency as a key plank in the UK’s future competitiveness. ‘Far from being a drag on growth, making our energy sources more sustainable, our energy consumption more efficient, and our economy more resilient to energy price shocks – those things are a vital part of the growth and wealth that we need,’ he said in a recent speech.
It is not just my colleague who does not find energy efficiency exciting. A survey by the UK’s Department of Energy and Climate Change (DECC) found that only 30% of UK householders have given a ‘lot of thought’ to saving energy in the home, with just under half giving it a ‘fair amount’ of thought. We might anticipate that this will change in the UK, and indeed across Europe as a whole as a result of the implementation of the EU’s Energy Efficiency Directive. This legislation, which entered into force in December 2012, requires: Member States to submit national plans to promote energy efficiency, energy distributors or retailers to save 1.5% per annum in energy sales from 2014-2020 and even requires 3% of the floor area of central government building to be renovated annually.
Clearly these measures represent a significant opportunity for companies that provide products and services that help companies, institutions and householders save energy; hence in part, our excitement over the rapidly expanding market for highly efficient LED lighting technology. But perhaps a less widely appreciated impact has been on the power and gas market across Europe. A recent research note from HSBC1 highlighted this issue, estimating that the Energy Efficiency Directive (EED) could reduce the EU’s heating energy demand by 6-12% by 2020 with a further 2-3% of the remaining demand being met by renewable sources of heat (for example Combined Heat and Power).
This picture is mirrored in the electricity markets as well. On 31 January 2013, the French grid operator RTE stated on its website that it expects electricity demand to lag GDP (it has traditionally moved in line with or ahead of GDP) on energy-efficiency measures. German power demand was reported to have declined by 1.4% in 2012, against a rise in GDP of around 1%. Clearly these reductions – combined with the impact of greater renewables on the grid – are causing real pain for companies in these markets.
Energy efficiency – who said it was boring!
1 EU Power Generators: CO2 + EED = trouble, HSBC, 6 February 2013
Risks include: the price of shares (“Shares”) in FP WHEB Sustainability Fund (“Fund”) may increase or decrease and you may not get back the amount originally invested, for reasons including adverse market and foreign exchange rate movements. Past performance is not a guide to future returns. The Fund invests in equities and is exposed to price fluctuations in the equity markets, and focuses on investments in mid-sized companies in certain sectors so its performance may not correlate closely with the MSCI World Index (the Fund’s benchmark). For full risks, please see fund prospectus on www.whebgroup.com.
General: This blog, its contents and any related communication (altogether, the “Blog”) is issued by WHEB Asset Management LLP (“WHEB Asset Management”). It is intended for information purposes only and does not constitute or form part of any offer or invitation to buy or sell any security including any shares in the FP WHEB Sustainability Fund, including in the United States. It should not be relied upon to make an investment decision in relation to Shares in the FP WHEB Sustainability Fund or otherwise; any such investment decision should be made only on the basis of the Fund scheme documents and appropriate professional advice. This Blog does not constitute advice of any kind, investment research or a research recommendation, is in summary form and is subject to change without notice. The performance shown does not take account of any commissions and costs charged when subscribing to and redeeming shares. WHEB Asset Management has exercised reasonable care in preparing this Blog including using reliable sources, however, makes no representation or warranty relating to its accuracy, reliability or completeness or whether any future event may or may not occur. This Blog is only made available to recipients who may lawfully receive it in accordance with applicable laws, regulations and rules and binding guidance of regulators. WHEB Asset Management LLP is registered in England and Wales with number OC 341489 and has its registered office at 7 Cavendish Square, London, W1G 0PE. WHEB Asset Management LLP is authorised and regulated by the Financial Conduct Authority with Firm Reference Number 496413. FundRock Partners Limited (formerly Fund Partners Limited) is the Authorised Corporate Director of the Fund and is authorised and regulated by the Financial Conduct Authority with Firm Reference Number 469278 and has its registered office at 8-9 Lovat Lane, London EC3R 8DW. The state of the origin of the Fund is England and Wales. The Representative in Switzerland is ACOLIN Fund Services AG, Affolternstrasse 56, CH-8050 Zurich, whilst the Paying Agent is Bank Vontobel Ltd, Gotthardstrasse 43, CH-8022 Zurich. The relevant documents such as the prospectus, the key investor information document (KIIDs), the Articles of Association as well as the annual and semi-annual reports may be obtained free of charge from the representative in Switzerland.
The MSCI information may only be used for your internal use, may not be reproduced or re-dissseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages (www.msci.com