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In these uncertain times, it’s helpful to find something positive to celebrate. So here’s some good news - Great Britain just got a bit greener this week. At 6.10am on Tuesday morning a new record was broken - the longest time the country has been powered without coal since the Industrial Revolution.
According to the National Grid ESO, the previous stretch was 18 days, 6 hours and 10 minutes set in June last year. This year the last coal generator came off the system at midnight on 9 April, meaning three weeks of coal-free power and still counting.
The sunny weather certainly helped. On 20 April the record for new solar generation was also broken as solar farms generated more than 9.6GW of electricity.
But what’s really kept the coal-powered stations idle is the Coronavirus lockdown. While domestic consumption has risen thanks to the population being confined to their homes, this has not matched the sheer scale of the drop in industrial usage, as offices, shops and factories across the land remain closed.
According to Drax Electric Insights, the average electricity mix over the past seven days was made up as follows: 27% from gas, 25% from wind power, 21% from nuclear and the remaining amount a mixture of solar and biomass, plus some imports from France and the Netherlands.
This is a far cry from a century ago, especially pertinent today on the 100th birthday of champion NHS fund-raiser Captain Tom Moore. In 1920, when he was born, the entire country’s electricity was generated from coal.
What is particularly interesting is how the electricity generation mix has changed over that time. In the past 10 years, the electricity mix has changed more than in the previous ninety years combined.
The 1970s oil crises and the 1980s miners’ strikes saw huge shifts within the use of fossil fuels, mainly between coal and oil. Then expanding gas production in the North Sea drove a rapid switch from coal to gas in the 1990s.
According to research from Imperial College London, between 1920 and 2010, 80-100% of the electricity generated came from fossil fuels. Between 2010 and 2019 that halved to just 40%1.
Coal has contributed less and less to the power mix in Britain as plants have been brought offline, with the country on course to exit coal-fired power by 2025. If this pace of change can be maintained, renewable sources could be providing more than half of Britain’s electricity by the end of this decade, and Britain’s power system could be practically carbon free.
So what does this mean for investors? Firstly, the race for alternative sources of power has gone up a gear. Oil and gas companies will need to rapidly move towards greener ways of powering the planet.
BP has been producing renewable energy for more than a decade while rival Royal Dutch Shell has been increasing capital expenditure on its new energies division. However, oil remains their dominant source of revenue and with the oil price currently at record lows due to the lack of demand from travel restrictions, the outlook for the oil majors couldn’t be more challenging.
On the positive side this will mean cheaper transportation costs for industry and motorists once things start to get nearer to normality, but on the negative side the oil majors have been a major source of income for investors through the reliable dividends they have paid in the past. Earlier this week BP said it would maintain its dividend, but today Shell cut its dividend for the first time since the second world war.
Secondly, while the energy mix was solely reliant on coal a century ago, it is now far more diversified. Investors should be diversified too. Just as the country’s electricity generation comes from a combination of gas, wind power, nuclear, solar and biomass, it would be wise to invest across a diverse range of energy sources as they each have a role to play - whatever the weather.
1 Dr Iain Staffell, Imperial College London, Drax Electric Insights Quarterly, Q4 2019
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
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