Thursday 21 October 2021

COP 26 - What's It All About?

It's just over a week of the most important global gatherings of world leaders and climate scientists will commence which could have huge implications for the future of our world.

The COP gatherings (Conference of the Parties) are held every year. They provide an opportunity for the world to focus on our warming planet and finding ways to tackle the problems caused by our addiction to fossil fuels such as coal, oil and gas. The first one took place in Berlin in 1995. Unfortunately we have not made much progress over the past 25 years as the warming effect from greenhouse gases continues to increase every year...currently we are 1.2C above pre-industrial levels.

The most significant COP was held in Paris in 2015 when the world leaders finally agreed to limit global warming to well below 2.0C and preferably a lower target of 1.5C. Each country has promised to reduce carbon emissions and to align their economy with this globally agreed target and these are reviewed every five years to see which countries are on track and which are lagging behind.

These targets and pledges are voluntary, there are no sanctions if countries fail to meet their targets or even if they fail to take any action to reduce emissions.

Why Is This COP Important?

This should have been held in 2020 but was postponed due to the global pandemic. At Glasgow, each country is required to submit their first 5 year progress report since the Paris agreement - these are called NDCs (Nationally Determined Contributions). Unfortunately we have not made much progress over the past 6 years and the Intergovernmental Panel on Climate Change (IPCC) recently declared 'Code Red for Humanity'. Rather than the 1.5C or even 'well below' 2.0C target, we are currently on track for warming of 2.9C by the end of this century.

COP26 President Alok Sharma said "The world will soon face catastrophe from climate breakdown if urgent action is not taken".

What More is Needed?

Everyone knows what steps are required to reduce carbon emissions to a sustainable level

quickly phase out coal

phase out oil and gas

more investment in renewables plus energy storage

more help for developing countries with $100bn each year for climate

protect and improve biodiversity

reduce meat consumption and increase plant-based options

Whilst everyone knows what is needed, no one is actually prepared to do it. Queen Elizabeth recently commented It’s really irritating when they talk, but they don’t do"

In May, the International Energy Agency released its roadmap to net zero which called for an immediate end to all new coal, oil and gas and instead  make a massive investment in clean energy.

How is the UK Doing?

Compared to most other developed countries, not too bad...we have legislated for net zero emissions by 2050 and the government have recently pledged to make our energy grid carbon neutral by 2035 by which time we should have reduced emissions by almost 80% compared to 1990 benchmark. Currently we are just over 40% reduction based on 1990 levels.

Earlier this week the government released its strategy for net zero and also a strategy to decarbonise heat and homes with the aim to phase out gas boilers by 2035 and push ahead with heat pumps. Both have received a mixed response from the climate experts and media. Unfortunately the chancellor refuses to borrow the required funds to meet the challenges which seems to confirm that the government does not regard climate warming as a crisis.

Therefore in absolute terms, it currently looks like we are not likely to hit our net zero target by 2050 and we are certainly not aligned with the IPCC's 1.5C target. According to the CCC, we are failing to meet carbon reduction targets for the period 2023 to 2028 and whilst we have made progress on energy, we have failed to tackle transport and home heating.

We are responsible for less than 2% of global emissions compared to China 28% and USA 15%. However on a per capita basis, the average Brit emits twice as much as the average person in China whilst the average American holds the record and emits 2x the average Brit and 4x the average person in China.

Also, we run a mainly service-based economy with our manufacturing off-shored to the likes of China. All of our clothing, TVs, Phones, garden furniture, washing machine etc. etc. is mostly imported along with all the carbon footprint associated with extracting the raw materials, manufacture and transport of the huge volume of goods.

Our real emissions are therefore probably closer to 3% so we should not be too complacent.

What About Other Countries?

The world's biggest carbon emitter China has pledged to become carbon neutral by 2060 and has recently announced that it will not finance new coal production in other countries. However its domestic consumption is heavily dependent on coal which accounts for two-thirds of electricity demand with solar and wind providing 30%

The US is the world's second largest carbon emitter behind China. It has pledged to reduce emissions by 50% by 2030 compared to 2005. It is aiming to become net zero by 2050 and Biden has pledged to aim for 100% carbon-free electricity by 2035.

India is the world's third largest carbon emitter and has pledged to reduce emissions by 35% by 2030 which is clearly unambitious. It has not set a target date for net zero and has not (so far) delivered an updated NDC for COP26. India has announced plans to increase coal production as part of it's post-covid economic recovery.

The EU is responsible for around 8% of global emissions and has legislated to reduce GHG emissions by 55% by 2030.

Whilst many countries have pledged to reduce emissions over the longer term...2050 or 2060, action on short term reductions are important so there needs to be much more focus on ways to get emissions down by at least 50% by 2030. This looks increasingly unlikely with just over 8 years to go. Currently we are seeing carbon emissions still rising year after year (except 2020 due to Covid lockdown) and we are on track not for a reduction but an increase of 16% by 2030.


A lot of focus will be on securing net zero emissions by 2050 and keeping the lower target of 1.5C "within reach". The recent IPCC report confirmed that 1.5C was still possible "but only if unprecedented action is taken now".

There is no sign of unprecedented action from any G20 country. The pledges from each country made in Paris in 2015 were not enough to keep warming below 2.0C let alone 1.5C and the updated pledges (NDCs) for COP26 are still not enough.

Personally, I can only conclude that our world leaders do not yet take the climate issue seriously...they are not responding with the urgency required to tackle a climate crisis because they don't really accept we have an emergency. Sure they will make promises and the event will be hailed as a success...but then it will be back to economic growth and business as usual. Subsidies and licences for new coal, oil and gas to grow our economies and preserve jobs; more and more consumption and more air travel and world fact just more of everything.

And of course the climate problems will get worse each year and on we go to COP27 in if by arranging a conference each year and reading lots of reports and discussing the issue they are actually doing something.

So, I am really not expecting very much but would like very much to be surprised! Until there is sign of real progress, I will continue to take an increasingly defensive position with my may be some time!

Over to you...what do you think about the climate issues and the COP26 gathering? Leave a comment below.

Tuesday 5 October 2021

Bluefield Solar - Final Results

Bluefield Solar (BSIF) was added to my SIPP portfolio in March 2019. It's initial focus was purely on solar power in the UK but last year the Company resolved to broaden its focus to include up to 25% in other forms of renewables such as wind and also energy storage and also expand overseas. They have recognised that storage of renewable energy will become a vital part of the transformation towards net zero emissions over the coming years and I certainly think this is a smart move.

In June, the company announced a deal to acquire 109 small-scale onshore wind turbines for £63 million located throughout the UK. 90% have government subsidies and the remainder will be exposed to fluctuating power prices. BSIF have tapped investors for a further £105m to fund the purchase with an offer of shares at 118p which represented a premium of 8%.

Approximately 60% of solar assets are covered by the old subsidy scheme which provides a guaranteed return for 20 years from the date of connection to the grid. The other 40% have rolling power purchase agreements which generally last for 3 years and are then renewed.


The company has today issued full year results to end June (link via Investegate). Underlying earnings per share reduced by 3.9% to 9.16p and the share price total return including dividends fell by -3.8% due to a 10% fall in the share price from 135p at the start of the period. There has been a corresponding drop in the premium to net assets - 18% last year but now around 8%.

The company pays quarterly dividends and will pay out a total of 8.0p for the year which gives a yield of 6.5% based on the current share price of 123p. However, the board have now de-linked dividend increases from RPI.

The total annualised return for shareholders since launch in 2013 has been 75%.

Chairman John Rennocks said: "We are pleased with the strong earnings performance in the period despite covering a particularly challenging time for the energy markets due to the turbulence caused by Covid 19. We were pleased to deliver a sector leading dividend of 8p per share, post debt amortisation to shareholders while the Net Asset Value also held up well which we believe will support the share price going forward. The robust nature of the earnings from the portfolio during the pandemic highlights the durability and defensive nature of the Company's investment strategy. We look forward to updating the market on further attractive investment opportunities in due course."


The ability to store excess renewable energy will be the key to a full transition on the UKs path towards net zero by 2050. The government have recently relaxed the rules to encourage far more storage capacity which should be good for the likes of Bluefield. They have excess capacity and spare land which could lead to productive partnerships with storage providers subject to planning considerations.

Energy Pricing

The recent rise in wholesale energy prices should be good for the Company's model over the coming year. The average contracted price for the coming year from June 2021 is £61.7/MWh compared to just £48.2/MWh over the past year mainly due to Covid. Solar+storage and wind+storage can replace the baseload capacity previously provided by coal and now by gas. An increase in storage capacity will be essential to manage and smooth out the intermittent nature of renewable energy - the wind doesn't always blow and the sun doesn't always shine.

BSIF have now increased the life expectancy of its solar assets from 25 years to 40 years. Unfortunately, so far, this has not resulted in a boost to NAV which one might have expected to see.

Share price & NAV(red line) past 12 months


Obviously a disappointing year for this fund and the renewables sector generally. However, the longer term prospects remain bright and the government have recently announced its ambition to make the UK grid fossil free by 2035 which should support increased funding and opportunities for wind and PV solar.

A further focus on decarbonisation will come from the COP 26 gathering next month where global leaders will lay out their plans to limit global warming to 1.5C and set out how they aim to reach net zero emissions by 2050.

Over the past year I have been reducing my weighting to the renewable infrastructure sector and have therefore sold several holdings and reduced my holding in Bluefield Solar from 5% to just 2% of my 'green' portfolio. However I plan to continue to hold this lower weighting in the hope of a better performance from Bluefield going forward.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

Friday 1 October 2021

Ceres Power - Interim Results

Ceres is a fuel cell technology and engineering company and is listed on AIM. It is a world leader in low cost, next generation fuel cell technology which can facilitate the transition to zero-carbon emissions. They aim to play a central role in the global transition to clean, affordable energy to help address the climate crisis and this is why Ceres Power was added my green portfolio in February 2020. The technology can be used in a variety of applications - transport, heavy industry, data centres and home heating.

Fuel cell technology is already a core component of energy strategies in Japan, Korea, Germany and the US. Ceres are working with global leaders such as Bosch to embed their technology in mass market products. The stationary global fuel-cell market is estimated to be worth over $40bn by 2030


In January 2020, German engineering giant Bosch increased its holding in Ceres from 4% to 18% citing their steel fuel cell technology as potentially the best in the business. Bosch say the market for the fuel-cell power station could be worth €20bn by 2030. It plans to invest €400m into its solid oxide fuel cell business between now and 2024 and will also install 100 small scale fuel cell power stations this year to generate power for industrial and residential customers as well as data centres.

Other partners include China's engines giant Weichai Power who hold a 20% equity stake.

The company has licence agreements signed up with four of the world's largest engineering and power companies including Japan's Miura and Doosan of S. Korea who are a global leader in the stationary fuel-cell market.


The company has this week released results for the half year to end June 2021 (link via Investegate).

Ceres is growing quickly. From just under £1m in 2015, they have increased revenues significantly in the past four years. Just in the past 6 months revenues increased by 95% to £17.4m (2020 £8.9m). They anticipate around £31.5m for the full year. Current market cap. is around £2bn with a share price of £10.80.

Gross profits increased to £12.2m (£7.1m) on margins of 72%.

The company has a strong balance sheet with no debt and cash in the bank of £263 million boosted by a placing of new shares in March which raised £180m.

The company plan to move to the main market next year and should enter the FTSE 250 which means they will be picked up by various index funds.

Share price past 12 months

Commenting on the results, CEO Phil Caldwell said: "We are pleased to report a strong performance for the Company in the first half of 2021, including a notable increase in our revenues at sector-leading gross margins. The outlook for clean technology innovation and hydrogen remains strong, buoyed by growth in strategies, regulation and green investment. Our partners continue to announce significant developments in the scale and application of our technology and the high level of interest and early engagement around its use for electrolysis to produce green hydrogen is very promising."

Huge Potential

The company are working on a first-of-a-kind 1MW solid oxide electrolyser which is hoped will be operational in 2022. This should unlock the potential for green hydrogen for use in industrial processes and energy generation.

Whilst there are many companies in the proton membrane fuel cell sector, global companies are signing up solely with Ceres in the solid-oxide fuel cell department where the company is a global market leader.

Solid Oxide Fuel Cell

The company doesn't want to focus on fuel cell manufacturing but rather a technology licensing company working closely with a range of partners who are looking to adapt their business' and address the huge challenges posed by climate change. Over the past 6 months these account for 60% of revenues.

Analysts at Berenberg have likened the companies licensing model to ARM Holdings whose RISC technology became the default during the smartphone revolution of the past decade. The broker suggests they could generate revenues of £800m each year from licensing agreements with their partners over the coming decade.

With the COP 26 climate gathering coming next month, the focus is on the ambition of decarbonisation and hydrogen technology. Ceres is well placed to play its part in the global transition to affordable clean energy supported by some of the world's most progressive players in those markets.

The shares currently account for 5% of my green portfolio.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation... investing in smaller companies can be rewarding but is higher risk - always DYOR!