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techsuch May 9, 2021 0 Comments

Cleantech Outlook 2021: Renewable Investments to Remain StrongAfter a strong year, what’s ahead for the cleantech space in 2021? Read on tolearn what analysts had to say about the cleantech outlook.Click here to read the previous cleantech outlook.The year 2020 saw uncertainty increase globally as the coronavirus pandemictook over the world.Despite the overall volatility, the trend toward a green energy transitiongathered pace as governments continued to announce measures to fight climatechange and investor interest in cleantech increased.With 2021 now in full swing, the Investing News Network (INN) spoke to anumber of experts in the cleantech field to discuss their outlook for theindustry. Continue reading to learn what they had to say.## Cleantech trends 2020: The year in reviewMeasures to contain COVID-19 hit every country globally, with lockdowns andtravel restrictions being a common theme throughout 2020.Despite the difficulties caused by the pandemic crisis, several recentdevelopments give grounds for increasing optimism about the world’s ability toaccelerate clean energy transitions and reach energy and climate goals,according to the International Energy Agency (IEA).“Still, major issues remain,” Fatih Birol, IEA executive director, said in arecent report. “Solar is leading renewables to new heights in markets acrossthe globe, ultralow interest rates can help finance a growing number of cleanenergy projects, more governments and companies are throwing their weightbehind these critical technologies, and all-important energy innovation may beabout to take off.”Renewables were a very resilient segment in 2020 across the globe, EdurneZoco, executive director for the clean technology and renewables team at IHSMarkit, told INN.“It was an outlier to the COVID-19 pandemic economic impact,” she said. “Therewas an initial strong impact on the solar supply chain and manufacturing in Q12020 due to a halt in production and a shortage of components, but productiongradually restarted from Q2 2020, and both production and installationsfinished the year strongly with a record of shipments and installations in Q42020.”Wind installations also grew year-on-year in 2020, while the grid-connectedenergy storage market strongly rebounded to reach $4.2 billion globally.Additionally, 2020 saw unprecedented growth in low-carbon hydrogen projectsaround the world, according to IHS Markit data.“Overall, despite initial disruptions around the supply chain and short-termdisruptions caused by restrictions on movement slowing installations anddevelopment, the cleantech sector has been an outlier in 2020 and performedexceptionally well,” Zoco said.Similarly, Céline Bak of Analytica Advisors told INN that the renewable energyindustry has continued to grow. “I guess in part because these are projectsthat were approved, and because there’s such a lot of appetite in the market,”she said.At the end of 2019, Greenlane Renewables (TSXV:GRN) President and CEO BradDouville expected increasing levels of activity and growth in the renewablenatural gas (RNG) space.“(We) saw more activity than expected from the oil and gas supermajors movinginto the space looking for RNG offtake and financing projects, which ispositive for Greenlane,” he said, adding that the challenge in 2020 wasmanaging the growth.Aside from COVID-19, last year also saw an explosion of announcements fromgovernments and companies related to low-carbon targets and decarbonizationstrategies.The announcement of China’s net-zero plan coincided with Japan formalizing itszero-carbon agenda for 2050, along with a news from South Korea. The EU’s net-zero plan is also currently for 2050, Zocco pointed out. However, the IEA hasbeen calling out for even more countries and businesses to get on board withreducing emissions.“We need to redouble efforts to bring energy access to all those who currentlylack it, and we need to tackle emissions from the vast amounts of existingenergy infrastructure in use worldwide that threaten to put our shared goalsout of reach,” the IEA’s Birol said.Ensuring that new clean energy technologies are available in time for keyinvestment decisions will be critical, according to the IEA.“The cleantech sector has been extremely resilient in 2020, and companyvaluations have skyrocketed,” Zoco said, with stocks for renewable companiesat historic high levels.“Moreover, 2020 saw a boom in the stock prices of hydrogen companies asnations increasingly incorporated the low-carbon gas into theirdecarbonization strategies,” she said. “Another interesting phenomenon is thatmore cleantech and electric mobility companies chose to enter the publicmarkets using special purpose acquisition companies (SPACs).”A SPAC is a company with no commercial operations that is formed strictly toraise capital through an initial public offering for the purpose of acquiringan existing company.Looking purely at the stock market performance, the cleantech sector had abreakout year massively outperforming the market despite the bull marketwitnessed starting in late April to early May and continues to this day, Yuan-Sheng Yu, who leads Lux Research’s Energy Program, told INN.Using clean energy ETFs as a benchmark, all of the top clean energy ETFs, suchas iShares Global Clean Energy (NASDAQ:ICLN), Invesco WilderHill Clean Energy(NYSEARCA:PBW) and First Trust NASDAQ Clean Edge Index (NASDAQ:QCLN) allwitnessed greater than 100 percent year-on-year returns, with some breakingthe 200 percent mark.“Despite the impacts of COVID on the global economy, the cleantech space wasdefinitely a bright spot,” Yu said. “Not only did renewable energy seesignificant growth from a capacity standpoint in 2020, the seriousness thatcountries and corporations are now looking at clean energy and climate changewas only catalyzed during COVID-19.”## Cleantech outlook 2021: What’s aheadWhen asked about what to expect in 2021 in the cleantech space, Bak sharedsome of the trends that investors should keep an eye out for.“I think that certainly in the US, a major clean technology trend for thisyear will be offshore wind,” Bak said. “There’s a new technology that is beingdeveloped called floating offshore wind, and my prediction is that there’sgoing to be a lot more investment in that.”Another trend that Bak sees as continuing in 2021 is the push for electricvehicles (EVs).“The new administration in the US is going to very quickly ramp up incentivesfor infrastructure for EVs. That will obviously lead to volume, and volume weneed to reduce costs,” Bak said.Lastly, Bak is expecting tension over a solution for long-haul transportationto continue.Looking at what’s ahead, IHS Markit anticipates a record year for cleantechdeployment in terms of renewable and storage installations in 2021. That willfollow a 2020 that saw unprecedented interest around hydrogen as adecarbonization tool.For IHS Markit, renewable investment will continue strongly in the topmarkets: Mainland China, the US and Europe. Global annual solar photovoltaicinstallations are also predicted to grow by over 30 percent in 2021, led byinstallations in Mainland China, the US and Europe. Wind installations arealso forecast to have double-digit growth in 2021.“On the storage side, market fundamentals have strengthened, driving front-of-the-meter battery energy storage growth, despite the short-term impact ofCOVID-19,” Zoco said. “Increasing competitiveness with conventionalgeneration, uptake of solar plus storage, participation in wholesale marketsand opportunities across emerging markets underpin the growth potential ofbattery energy storage.”Meanwhile, on the mobility side, the EV infrastructure market will also be akey area of growth in 2021.“Especially in the US,” Zoco said. “Which reflects a number of changes, namelythe emergence of more expansive state decarbonization policies, directing moreEV infrastructure investment toward underserved communities and focusing onready-made charging infrastructure.”For Lux’s Yu, the EV craze will continue in 2021 with many companies lookingto cash in on the hype while they can.“However, not all will end up being successful businesses and some may noteven put out a vehicle at all,” he said. “Despite that, there will be somemajor winners within the EV space as they find their place next to Tesla inthe coming years.”Another area where Lux Research is expecting to see big “winners” will behydrogen.“Companies developing technologies for the production, transport, storage, anduse of hydrogen are likely to benefit from the growing interest in thehydrogen economy, which we are already saw towards the end of last year,” Yusaid. “A wildcard is carbon-related technologies. This would include carboncapture, carbon conversion, and carbon utilization.”For his part, Douville is expecting an overall better market in 2021.“While uncertainty remains with respect to the COVID-19 pandemic and itsongoing impact on global economies, the energy transition is here to stay andwill play a meaningful and growing part in countries’ efforts to stimulatetheir economies while tackling climate change and moving toward a decarbonizedfuture,” he commented to INN.Speaking about investing in the cleantech space, Bak said the price-to-earnings multiples of renewable energy companies are two and a half to threetimes higher than those of oil and gas companies.“So investors who have sought out even something as simple as possible, assimple as a fossil fuel-free portfolio, they have obviously done betterthemselves,” she said.Bak added that another suggestion for investors looking to jump into the spaceis to look for companies that are making commitments to decarbonization.“(The companies that have held these commitments the longest), they’re thecompanies that will be first movers and therefore have advantages in terms oftheir partnerships, in terms of even the quality of the investors that theyalready have,” Bak said.For her part, Zoco said cleantech is an area of growth that has outperformeddespite a major economic downturn and pandemic.“This gives an indication of the solid basis of this space,” she said.“Investors should be looking not only into technology cost, but alsotechnology value for the system and potential for quick scale and synergieswith other sectors.”Yu said that the number one suggestion for investors interested in cleantechis technical due diligence.“Many technologies may take 10 plus years before reaching market and even thenthe energy industry is still quite conservative and may not be willing toadopt a new process that does not fit neatly into existing infrastructure andworkflows,” he said. “Thorough due diligence of the technology is critical.Simple laws of thermodynamics are often ignored by cleantech companies lookingto make outlandish claims and cost is always key in the energy space, both ofwhich can be quickly verified with the proper assessment.”There are, however, some challenges that the cleantech space will face goingforward.“Decarbonization of power is very advanced,” Zoco said. “However,decarbonization of heat and transport are still not that advanced, anddecarbonizing these sectors will require huge investments and scale that needsto occur in a context of global economic downturn.”At the same time, the boom of renewables and increasing renewable penetrationin the energy mix requires additional planning and investment around storagesolutions to level power load and reduce the strain on the grid and major gridinvestments, Zoco added.“Regulatory uncertainty and market saturation can also slow energy storagegrowth,” she said, adding that another challenge is recycling solutions andprocesses ― which need to be standardized and enforced across the cleantechindustry to continue allowing sustainable industry expansion.For Yu, the biggest challenge facing the cleantech space going forward isproving and validating their technologies in the commercial setting.“While cleantech is a very broad term and includes straightforward solutionssuch as analytics and IoT platforms for managing energy consumption, truedecarbonization technologies require significantly longer investment timelinesbefore commercialization,” he said.For the expert, the concern is how patient will investors be in 2021.“In 2020, many investors saw their investments double or more in a very shortspan — this will unlikely continue,” he said. “There are savvy investors incleantech that understand the dynamics of developing cleantech technologies,but the typical investor and VC seldom have that sort of patience.”As 2021 kicks off, Zoco also mentioned some factors that cleantech investorsshould pay attention to.“If there were a deepening of the pandemic throughout 2021 and subsequenteconomic fallout, this could impact total investment in the sector,particularly from corporations,” she said.For Lux’s Yu, while post-COVID economic recovery will be for all sectors, itis also a once-in-a-lifetime moment where trillions of dollars can beallocated towards the development and deployment of clean energies.“This can be very specific … but broader goals around increasing renewableenergy penetration in the energy mix will also lead to more favorable marketdynamics for cleantech and influx of capital to support it,” he said.Additionally, Zoco said the pace of US clean energy power development will beinfluenced by the late 2020 passage of the Consolidated Appropriations Act andNotice 2021-05 from the Treasury. They include the recent extension of solarinvestment tax credits and wind production tax credits.“This will consolidate renewables growth in the US market,” she said.In Europe, upcoming developments around the Green Deal, an ambitious packageof measures ranging from cutting greenhouse gas emissions to investing incutting-edge research and innovation, will kick off in 2021, as the recentlyannounced EU battery recycling policy showcases.“Finally, 2021 is the first year of the 14th Five Year Plan in Mainland China,which will be the first one to achieve net-zero carbon emissions by 2060 andshould be also closely followed,” Zoco said.Don’t forget to follow us @INN_Technology or real time updates!Securities Disclosure: I, Priscila Barrera, hold no direct investment interestin any company mentioned in this article.Editorial Disclosure: Greenlane Renewables is a client of the Investing NewsNetwork. This article is not paid-for content.The Investing News Network does not guarantee the accuracy or thoroughness ofthe information reported in the interviews it conducts. The opinions expressedin these interviews do not reflect the opinions of the Investing News Networkand do not constitute investment advice. All readers are encouraged to performtheir own due diligence.

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