CONTRIBUTORS
Andrew Chambers
Portfolio Manager,
Real Assets,
Martin Currie Australia
This is a chapter from the Franklin Templeton Institute paper, Energy transition: Accelerating investment opportunities. To read all chapters in this paper, download the complete PDF or click here.
Chapter preview
Capital expenditures required to support the transition to clean energy and electric options are staggeringly large. Expansion requires significant network capital expenditure, additional storage, smart grids and energy efficiency. Australia is planning to provide reliable and affordable electricity across all regions, while supporting population growth. This growth in the electricity network provides opportunities for listed utilities to grow. India’s population growth, and particularly a growing middle class, lead to growth in anticipated demand for installed electricity capacity at 9.5% per year!1
These investments will completely remake the mix of energy sources. In so doing, once “boring” or stable listed utilities will have additional spark in the years ahead as an investment.
We encourage you to read the rest of the chapter to learn Martin Currie’s views from a real asset investment standpoint on these capital commitments, including:
- The electrification transition coupled with a growing population requires triple the current generating capacity.2 In some emerging market countries, electrification involves connecting entire communities to electricity for the first time.
- Existing electricity transmission networks will require lengthening and expanding as newer, renewable sources are often captured in many different locations.
- Increasing need for storage solutions (incorporated into existing grids) means growth in batteries, pumped hydro or potentially newer technologies such as hydrogen.
This is a chapter from the Franklin Templeton Institute publication, Energy transition: Accelerating investment opportunities. Arguably, humanity’s greatest current challenge is the need to shift to low and net-zero carbon in a little less than 30 years. New technologies are accelerating the renewable energy transition while reducing environmental impacts. The renewable energy sources of today and the future require new and smarter technologies as well as the rapid creation of new infrastructure. These challenges create investment opportunities as investors have a critical role given the capital required to fund this transition. To read the full paper and explore views from across our specialist investment managers, download the complete PDF or click here.
Endnotes
- Source: Central Electricity Authority. Report on optimal generation capacity mix for 2029-30. January 2020.
- Source: IRENA. 2023. World Energy Transitions Outlook 2023: 1.5°C Pathway; Preview. IRENA: Abu Dhabi.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice.
Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls.
Equity securities are subject to price fluctuation and possible loss of principal.
Investing in the natural resources sector involves special risks, including increased susceptibility to adverse economic and regulatory developments affecting the sector—prices of such securities can be volatile, particularly over the short term.
Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks.
International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.
Sovereign debt securities are subject to various risks in addition to those relating to debt securities and foreign securities generally, including, but not limited to, the risk that a governmental entity may be unwilling or unable to pay interest and repay principal on its sovereign debt.
Investments in fast-growing industries like the technology and health care sectors (which have historically been volatile) could result in increased price fluctuation, especially over the short term, due to the rapid pace of product change and development and changes in government regulation of companies emphasizing scientific or technological advancement.
Real estate securities involve special risks, such as declines in the value of real estate and increased susceptibility to adverse economic or regulatory developments affecting the sector.
Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.
Franklin Templeton and our Specialist Investment Managers have certain environmental, sustainability and governance (ESG) goals or capabilities; however, not all strategies are managed to “ESG” oriented objectives.