Experts see investment potential in green energy

Joanna Seow, Straits Times 11 Jul 09;

THE shift towards green and clean energy sources will provide plenty of opportunities for investors, according to market observers.

Mr Francois Nguyen, director and senior policy adviser for electricity markets at the International Energy Agency (IEA), said concerns over climate change and energy security combined with technological advances are creating 'very significant potential for investment in renewables'.

He told the Nomura Asia Equity Forum this week that the financial crisis has caused some difficulty in financing renewable energy projects, but he sees this as a temporary setback.

'Over the long run, the total investment in renewables worldwide would total about US$3.3 trillion (S$4.8 trillion), and that would be higher than the investment in fossil fuel power plants,' he added.

Singapore-based investor Jim Rogers agreed that sources of alternative energy are 'going to have a fantastic future'.

He told the forum that demand for energy is increasing, especially in fast-growing countries such as China and India. Yet energy supply and productive capacity are in decline. These are two factors that will drive up prices.

'The IEA says that even after discoveries, oilfields around the world are declining at a rate of 6.7 per cent a year. So 20 to 25 years down the road, there'll be no oil at any price,' said Mr Rogers.

He added that in this period of 'huge forced liquidity', governments around the world are printing large amounts of money. Historically, this has always led to higher prices all round, so it is likely that energy prices will go up, which is why he is bullish on the market.

Mr Nguyen said the share of renewable and nuclear energy in the global power sector will grow from about one- third now to two-thirds by 2050.

He added that one of the advantages of investing in nuclear power is that the cost of generating it is less vulnerable to fluctuations in fuel costs.

He pointed to China, India and the United States as the major potential markets for nuclear reactors.

Mr Rogers, who founded a commodities index, added that 'commodities have been and will continue to be a better place to be, on a fundamental basis, than stocks'. He is also optimistic about agriculture, as products such as sugar, cotton and coffee are performing at 50 to 80 per cent below their all-time highs, and have plenty of room to rise.

This sector includes biofuels, which tie in with his bullish outlook on new energy sources. 'Whether we like it or not, the world is going to have to make huge investments in alternative energy,' he said.