Renewable & Clean energy
Clean Energy is any energy which production and utilisation does not harm the environment.
Renewable means that the energy sources are inexhaustible (on a geological time scale), unlike, for example, the fossil fuels, of which there is a finite supply. Renewable energy can come out of very diverse sources, such as organic matters, hot springs , rivers and sea flowing waters, wind or sun.
Renewable Energy is a major segment of Environment Friendly Technologies. A large number of organisations, ranging from early stage companies to major international groups are already active in this segment.
In this sector ECT Fund also pays keen attention to specific parts suppliers.
We distinguish between the following sources of clean & renewable energy:
1.1. Processes using Biomass
Biomass is probably one of the most promising energy sources. It includes all plants, whether cultivated industrially or as production by-products. The chemical constitution of biomass is very close to fossil oil, which also originates from plants, transformed through millions of years. In Europe, Austria , having rejected nuclear energy, has evaluated that biomass alone can meet half of its current energy needs. And in Latin America, Brazil is already using biomass for a third of cars & trucks' consumption.
Energy derived from Biomass can be produced through biological or chemical routes and includes:
- Biofuels (bioethanol and biodiesel) are produced through chemical routes, out of plants specially grown for this purpose. These include sugar cane, rape seed and soybean. Biofuels can be used almost directly by most engines designed for conventional fuels.
- Gasification is economically possible when biomass humidity is low. Energy is produced through heating and pressurisation. Usually the necessary energy is self-produced.
- Methane, produced through biological routes, is usually utilized near or at the production site, for heating purposes sometimes as mechanical energy. Raw materials include agricultural by-products or organic wastes (straw, manure, sewage, and waste from food processing factories). In this regard, methane production can have the addional advantage of both reducing waste and producing energy.
As raw material transport can be relatively costly, biomass derived energy is generally produced onsite.
ECT Fund considers investments in manufacturers of biomass producing energy systems, as well as suppliers of processing technologies, equipment, and related services.
1.2. Processes not using Biomass
Technologies not using biomass are sophisticated and the capital expenditure is large. The returns on investments lie in the ability for companies to efficiently use their R&D budgets and select the appropriate technology.
Importantly, the innovation of the technology is more important than the size of the company in determining returns on this sub-sector.
- Hydroelectricity: A major electricity source for almost a century. There are still environmental concerns over the hydroelectricity sub-sector and increasing government regulation may lead to reductions in the sectors attractiveness. Nevertheless, there is potential in sea or costal equipment. Small, decentralised production facility and micro stations are a growing market.
- Windmills or Wind turbines: More and more popular for electricity production. With scarcity of fossil energy and technological improvements, windmills will become increasingly competitive, especially in windy areas where the electrical wiring network is insufficient.
Currently, economies of scale's considerations are leading to a consolidation. Leading companies already install thousands of turbines per year. Historically, Danish and German companies have been major players but recently others have also appeared in the US , Spain , India and China . Windmill market should grow significantly. Carefully selected companies within this sector can be excellent investment opportunities.
ECT Fund considers investment in turn key, parts or service suppliers as well as wind farms. - Geothermic: It involves the use of heat buried inside our planet. Its potential depends on the location. The necessary technologies are well known. There are significant investment opportunities in engineering companies belonging to this sub-sector.
- Photovoltaic panels: Remain an expensive energy source but are easy to both install and run. It is a necessity in areas where there is no electricity network. It is also necessary if the needs do not allow another type of electricity supply, for example in a devastated area where the weight and mobility are essential to an emergency supply.
There are a number of photovoltaic panels makers but investors may be also interested in core technical parts, or companies combining photovoltaic effect with their core technology, like some tiles makers which are investing on regular tiles covered with photovoltaic cells. - Solar thermal panels: Already common and makers range from local plumbers to major equipment manufacturers. The key product differences between these makers lies in the potential life span and energy yield. Solar thermal panel usually forms part of a wider energy package. Solar panels are the primary component of most small-scale renewable energy generating facilities, in domestic or light industrial applications.
Solar heating systems are getting more and more popular and, in recent years, the European market has increased by around 30% annually. Economics still depends largely on government subsidies but yield and robustness are steadily improving, and most investments are beginning to get close to economic break even point.
Provided that selection criteria are fulfilled, ECT Fund may include hydroelectricity, windmills, geothermic and solar panels (heating or photovoltaic).
1.3. Energy Saving Technology and Storage
Today, total energy yield lies between 15~20% and in the case of transport systems, it can be as low as 5~10%. One can easily imagine the huge savings created from a small increase in efficiency.
Often solutions are technically simple and include cogeneration, insulation, re-use, or on site production. Most of those technologies are developed as regular improvements to conventional products. Together with new technologies and IT, monitoring also plays an increasing role in constantly fine-tuning the energy settings and hence energy saving.
ECT Fund concentrates on companies which have the strategy and ability to generate innovative products for this sector.
Some energy saving and storage techniques in the market have great potential and benefit from heavy R&D budget. These include:
- Flywheels store energy under the form of the kinetic energy of a rotating wheel and are easily transportable. Having been used since the mid nineties in cars, trucks or trains, flywheels are now becoming highly sophisticated.
- Fuel cells produce electricity out of hydrogen or organic fuel. They are said to have huge commercial potential, but still need improvements in reliability and economics. Many companies have invested in R&D in this sub-sector and hope to find the necessary improvement in the coming years. The ability to evaluate the efficiency of the R&D will determine the potential investment returns.
Hydrogen exists everywhere and, potentially, is an efficient way to store clean energy. The key issue is to find ways to develop stable and economically sound storage systems. Although it is a long term challenge, our focus will be to identify companies that are able to develop these storage systems.