Investors Stand to Gain Double Digit Returns from Accelerating Energy Industry Revolution, Navigant Paper Finds
18 Septembre 2019 - 1:00PM
Business Wire
New white paper concludes that Paris Agreement,
climate risk mitigation, and technology innovation call for shift
in portfolio strategy from asset managers and private investors
Without a change in thinking, investors stand
to miss out on a market for electricity products and services that
could reach $6 trillion by 2030
Due to a growing need for capital to fund transformative energy
companies and projects, investors face an unprecedented opportunity
to reduce exposure to outdated systems and maximize returns,
according to a new white paper from Navigant’s (NYSE: NCI) global
Energy practice.
The rapid decline of renewable energy costs has shifted customer
preferences, and energy markets are becoming more sophisticated and
digital in nature (in what Navigant refers to as Energy Cloud 4.0).
Concurrently, a coordinated global effort by national governments
to meet the energy transformation requirements of the United
Nations Paris Agreement creates a large need for ongoing
investments in energy production, transmission, and management
systems. In order to avoid losses on outdated assets, Navigant’s
paper suggests that investors need to shift their outlook away from
conventional energy sources such as combined cycle gas turbines,
which will no longer be reliable drivers of revenue.
The Navigant white paper anticipates this disruption will affect
the financial valuation of energy assets over the next 10 years, as
more value will be created in the distribution, supply, and
customer components of the energy system. The total market for
electricity products and services — assuming increased penetration
of distributed energy resources (DER), high electrification of
transportation, and an accelerated digital transformation — could
reach $6 trillion by 2030. Given the assumptions and conditions
outlined in the white paper, investors may realize an average
return of low double digits from investing in emergent
technologies.
“This is a call to action for every investment player — from
pension fund managers and venture capital principals to insurance
underwriters and asset managers,” said Jan Vrins, leader of
Navigant’s global Energy practice. “Investors remain focused on the
downside of risk, and not enough on the upside of opportunity.”
The private energy transformation already underway complements
the decarbonization provisions of the Paris Agreement, but there
are many other drivers, Navigant notes. Among them are the falling
costs of renewables and battery storage, increasing awareness of
the need for action on climate change, and growing consumer demand
for greener alternatives. Potential legislative initiatives on
green energy in the United States and elsewhere could accelerate
opportunities and reduce the cost of capital. However, Navigant’s
research indicates these opportunities are reliable even without
increased government subsidies or green-friendly regulation.
“A key challenge for investors is the sheer number of
opportunities within the Energy Cloud given the diverse array of
business models and monetization strategies,” says Jan-Willem Bode,
director with Navigant. “Investors need to understand the changing
energy landscape and which assets will remain profitable. Banks,
venture capitalists, public pensions, and private equity all have a
role to play based on their risk profiles – and all could deliver
superior returns to their shareholders under the right
strategy.”
According to the Navigant paper, in the era of the Energy Cloud,
three major trends will influence valuation and the market growth
of investees active in energy transformation:
- Growth and diversification of the renewable industry: As
the risks of renewable energy projects and assets become better
understood, pension funds and institutional investors are looking
to further expand their portfolios with new technologies and
business models. Investors with an appetite for merchant risk are
now pursuing grid-scale energy storage systems and renewable assets
financed using different types of corporate power purchase
agreements structured to secure a project’s long-term income.
- Expansion, modernization, and digitization of energy
grids:Vastly more capital will be needed to modernize the
energy grid that will manage a more complex set of (distributed)
assets and infrastructure and enable the move to a low carbon
economy. A blend of financial instruments will be employed to fund
the interconnection of large-scale renewable energy, grid
reinforcement programs, and the integration of distributed energy
resources like microgrid systems. The companies focused on building
and operating the grid of the future have significant growth
potential and offer great investment opportunities with interesting
returns.
- Network orchestration and platforms: Moving to a more
sustainable, highly digitized, and dynamic energy system results in
a growing number of services and value creation for customers.
E-mobility, building energy management, microgrid control, and
demand response software solutions, for example, offer a compelling
investment opportunity and offer higher risk-adjusted returns than
investments in physical assets and infrastructure. Venture capital
and private equity managers can recognize the medium-term value
creation from such platforms and support their growth in new
markets.
The Navigant paper notes that investors will also need to
understand key differences in opportunities in the United States
and those in Europe and the Middle East. Opportunities may be
smaller and less scalable in emerging markets, although some
technologies may be more applicable in those areas.
To learn more, download Navigant’s latest white paper, Financing
the Energy Transformation: Capitalizing on New Investment
Opportunities, and join the social media conversation through
#Finance2Climate.
With over 600 consultants, Navigant’s global Energy practice is
the largest energy and sustainability consulting team in the
industry. We collaborate with utilities and energy companies,
governments and NGOs, large corporations, product manufacturers,
tech vendors, and investors to help them thrive in a rapidly
changing energy environment. Our clients include the world’s 60
largest electric, water, and gas utilities; the 20 largest
independent power generators; and the 20 largest gas distribution
and pipeline companies. Navigant’s seasoned professionals and
highly skilled specialists form exceptional teams to help clients
transform their businesses, manage complexity and accelerate
operational performance, meet compliance requirements, and
transform organizations and systems to address upcoming changes as
the energy transition accelerates.
About Navigant
Navigant Consulting, Inc. (NYSE: NCI) is a specialized, global
professional services firm that helps clients take control of their
future. Navigant’s professionals apply deep industry knowledge,
substantive technical expertise, and an enterprising approach to
help clients build, manage, and/or protect their business
interests. With a focus on markets and clients facing
transformational change and significant regulatory or legal
pressures, the firm primarily serves clients in the healthcare,
energy, and financial services industries. Across a range of
advisory, consulting, outsourcing, and technology/analytics
services, Navigant’s practitioners bring sharp insight that
pinpoints opportunities and delivers powerful results. More
information about Navigant can be found at navigant.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20190918005098/en/
For more information, contact:
Ryan Dicovitsky Dukas Linden Public Relations 646.808.3646
Ryan@DLPR.com
Lindsay Funicello-Paul Navigant 781.270.8456
Lindsay.Funicello.Paul@Navigant.com
Kyle Bland Navigant Investor Relations 312.573.5624
Kyle.Bland@Navigant.com
Navigant Consulting (NYSE:NCI)
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