Renewables take the lead
Global Insights Report 7 May 2015

Global power generation is now driven by renewable capacity, that is, more power is coming from renewable sources than the conventional fossil fuels of oil, gas and coal.

Michael Liebreich, founder and Chairman of the Advisory Board at Bloomberg New Energy Finance at the 2015 “The Future of Energy Summit” stated that since 2013, 143 gigawatts of renewable energy capacity has been created versus just 141 gigawatts in traditional fuelled plants. He expects the change to continue with as much as four times growth in renewable capacity by 2030 – and all of this “despite the change in oil and gas prices…”

China still relies predominantly on coal for its energy. But just to depress Australia’s coal producers further, the rise in wind power in China is huge. The Chinese may be building a large number of nuclear reactors - more than a third of the world’s currently under construction – but even by Beijing’s own admission, nuclear capacity is intended to hit 58,000 megawatts by 2020, while wind power should rise to 200,000 megawatts over the same period.

China has a current wind capacity of 115,000 megawatts. That means that at present China’s wind farms could currently produce more electricity than all of the United States’ nuclear power plants (the country's nuclear reactors have a 2015 nameplate production that is intended full load output, of 103,860 megawatts1).

China is not alone in its development of renewable sources of energy. Traditional oil producing countries are also looking at massive investment into the renewable sector. In January the Dubai Water and Electricity Authority announced that as a result of falling solar energy costs it was raising its 2020 renewables target by seven times to 7 per cent of the country’s total power capacity, and its 2030 target increased to 15 per cent; that is a tripling of its solar targets.

Dubai tripled its solar target for the year 2030, to 15 percent of the country’s total power capacity. Dubai’s government-owned utility this week awarded a $330 million contract for a solar plant that will sell some of the cheapest electricity in the world.

The International Energy Agency expects solar power to be the biggest source of global electricity by 2050, a huge rise from its one per cent place in today’s energy production. The significant falls in prices of wind and solar power as well as the advances in technologies around their production have justified further their place in the energy markets. Ultimately renewable sources are built on technology, they are not a fuel per se. With time, the efficiency of solar and wind power increases and prices fall.

Shanghai-Sydney tie up?

Market rumours about a possible tie up between the Shanghai and Singapore stock-markets has seen a surge in the price of shares for bourse operator Singapore Exchange Ltd (SGX). Just as the recent trading link between Hong Kong and Shanghai, a link with Singapore would give investors easy access to Chinese equities.

Already, derivatives contracts on Chinese stocks on the Singapore Exchange are highly traded driving volumes to record highs and suggesting that investors want even more access to Chinese stocks. Such access gives investors the opportunity to buy Chinese stocks without the regulatory hurdles and currency risk of buying directly in China.

In order to benefit from growing demand, in 2014 the Australian Securities Exchange already partnered with the Bank of China to offer Renminbi settlement services and Westpac was granted a licence to trade derivatives in China. These may well be the early steps toward further links between the Shanghai and Australian stock exchanges.

There have been no official announcements by the Singapore Exchange to date, but is there smoke without fire? We will have to wait and see.

Best regards,

John James
For La Trobe Financial

     
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The above awards and ratings were given to the Pooled Mortgage Option within the La Trobe Financial Mortgage Fund and may be viewed

La Trobe Financial Asset Management Limited ABN: 27 007 332 363 and AFSL No: 222213 is the issuer and manager of the La Trobe Australian Mortgage Fund. It is important for you to read the Product Disclosure Statement for the Fund before you make any investment decision. The PDS is available on our website www.latrobefinancial.com or by calling 1800 818 818. You should consider carefully whether or not investing in the Fund is appropriate for you.

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1. Zenith's "recommended" rating indicates that it has high confidence in the manager meeting its objectives. The Zenith Investment Partners ("Zenith") ABN 60 332 047 314 rating referred to in this document is limited to "General Advice" (as defined by section 766B of Corporations Act 2001) and based solely on the assessment of the investment merits of the financial product on this basis. It is not a specific recommendation to purchase, sell or hold the relevant product(s), and Zenith advises that individual investors should seek their own independent financial advice before investing in this product. To view the relevant research information, please visit www.latrobefinancial.com The rating is subject to change without notice and Zenith has no obligation to update this document following publication. Zenith usually receives a fee for rating the fund manager and product against accepted criteria considered comprehensive and objective.
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