Clean Energy Trade Ripe for ‘Smart Money’, Singapore Envoy Says
(Bloomberg) -- Renewables are poised to attract fresh, large-scale investment as energy security and supply chain concerns drive an increase in demand and revenue for the sector, according to Singapore’s chief climate diplomat.
Growing global demand for inputs into the clean energy industry could cause price increases in the coming years, “unless industrial capacity keeps pace,” Climate Action Ambassador Ravi Menon told Bloomberg News on Friday.
“You need a price signal and then capital and investments will flow into this and the supply will then start to catch up. In fact, the smart money should already be investing in that now, knowing that there’s going to be demand and prices are going to go up,” the former central banker said. ‘Smart money’ typically refers to institutional investors and hedge funds.
Renewables demand is set to surge as fossil-fuel dependent countries scramble to boost their energy independence against a backdrop of prolonged oil and gas disruptions due to the Iran war. Already, South Korea and the Philippines are among those looking to fast-track such projects, and the S&P Global Clean Energy Transition Index has climbed 37% this year, outperforming the 30% gain in the S&P Global Oil Index.
“The political impetus is in line with the clean energy agenda because how do you make sure you don’t get caught in this situation again?” Menon said. He was the longest-serving chief of the Monetary Authority of Singapore, his tenure lasting more than 12 years before he retired in 2024.
This acceleration in the green transition could increase prices across the renewables sector including for consumers, Menon said. Higher demand and tighter supply for industrial metals and critical minerals, higher fuel costs in the short-term, and countries bringing clean-energy supply chains onshore would all contribute to the trend and ultimately create investment opportunities, he added.
Climate change will also bring longer-term inflationary pressures from increased spending on disaster recovery and adaptation, Menon said.
While there’s no immediate supply crunch thanks to China’s mass production and export of green technology, countries may want to diversify their supply chains to avoid relying on a single source, Menon said.
Still, “the energy security issue relating to renewables is nowhere near the scale of the concentration risk in fossil fuels,” he added.
A renewables rollout could, however, be undermined by a longer-term pivot back to coal, Menon said. It’s a strategy that some of Asia’s largest economies including India have already employed to deal with electricity shortages since the Iran war began in late February.
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