Investing in the potential for growth
In addition to real estate funds, Union Investment has started to focus on another asset class: renewable energy. The renewable energy market is one of the most prosperous markets and has significant potential for growth. Be it solar, geothermal, photovoltaics, biomass or wind energy (onshore and offshore), renewables are dominating research, politics and industry as an answer to a shortage of resources and an alternative to nuclear power.
The energy revolution
Through the energy revolution, Germany has set itself the objective of preserving the environment and saving energy whilst retaining competitive energy prices and its current level of wealth. Even in 2014, around 25 per cent of its energy requirements were met by renewable energy. This percentage is due to reach between 55 and 60 per cent by 2035. From a transition away from nuclear power, the expansion of grids, the development of new energy storage systems and the subsidisation of electric vehicles, the German Renewable Energy Act (EEG) delivers a stable framework for this tremendous change of course. This has made Germany a pioneer and raised the bar internationally as the renewable energy trend is being observed all over the world and can no longer be stopped.
Sustainability for the institutional portfolio
Union Investment derives highly promising opportunities for institutional investors from photovoltaics and onshore wind power in particular. Both of these technologies are tried and tested and possess the nature of an infrastructural investment. They are now well-established and are dominating markets all over the world.
A clean solution for over 20 years.
Wind power is currently the only green technology that can compete with the electricity production costs of the conventional electricity mixture. Onshore wind farms have been in commercial operation for over 20 years. In prime locations, modern turbines designed for wind speeds of between 3 and 25 m/s can reach up to 3,500 full load hours per year. Their output depends on the type of turbine, the nominal output, the wind speed at hub height and the area covered by the rotors.
Modern wind farms are becoming increasingly more efficient. The positive energy balance increases their ecological value, yet they are also growing in significance to national economies: new jobs can be created in collaboration with local partners, especially in underdeveloped areas.
With the wind.
A wind turbine consists of a rotor with a hub and rotor blades as well as a rotating nacelle with built-in generator and sometimes a gear mechanism.
The nacelle is positioned on a mast with strong foundations.
The rotor blades react to the kinetic energy of the flow of air and move the rotor hub. This rotational energy is fed into a generator which converts mechanical energy into electrical energy.
The brake prevents overspeed on the turbine and makes it possible to stop it (e.g. for maintenance).
In order to optimise its generation, a wind direction tracker ensures that the turbine always turns with the wind. If wind speeds are too high, e.g. faster than 25 m/s, the brakes on most turbines are activated for safety reasons.
Sunlight. Always there for us.
The energy from the sun that reaches the surfaces of the Earth each year is more than 7,000 times our primary energy requirements. It can now be used exhaustively, including with cutting-edge solar cells that can convert up to 20 per cent of the light into electrical energy (efficiency). According to the Fraunhofer Institute for Solar Energy Systems, the electricity production costs of photovoltaics will match the costs of conventional power stations from as early as 2020.
An infinite supply of energy.
The term ‘solar power’ covers solar heat, i.e. the direct use of heat energy, and photovoltaics for electricity generation. A solar power system is based on solar cells consisting of semiconductors. Silicon is used in these 95 per cent of the time. Their output is based primarily on the intensity of the sun’s rays and the ambient temperature. The principle of photovoltaics is based on what is known as the photovoltaic effect; the release of positive and negative charge carriers in a material upon exposure to light. A system such as this features solar modules consisting of multiple cells and is placed in an elevated position, pointing at the sun at a favourable angle. The direct current produced in the modules is converted to alternating current by a converter and then fed into the power grid.
1,600 hours of free energy per year.
Photovoltaics is an integral component of the energy mix all over the world. This technology uses a free and unlimited energy source: the sun. Germany can expect an average of 1,600 hours of sunlight per year. Other advantages of the technology include low CO2 emissions and low running costs.
Union Investment has therefore created a special infrastructural fund for photovoltaics. This fund is based on these two technologies. In light of the favourable legal and geographical circumstances, the portfolio of this fund currently contains investments in Germany, France, Great Britain and Ireland. The European portfolio is also widely spread out over various feed-in systems and manufacturers.
This special fund provides institutional investors with several crucial advantages:
"Many investors regard investment in renewable energy as a way of diversifying their portfolio while also benefiting from attractive risk/return conditions."
Martin Gromus, Investment Manager for the renewable energy fund
Investing in the future
What about the long-term feasibility of the various technologies? How can investors profit? And when? In the field of renewable energy, there are numerous segments which differ significantly in terms of both performance class and technology.
Years of expertise and experience in the construction and operation of various renewable energy systems are invaluable when it comes to evaluating the most promising technology in connection with a risk assessment. Union Investment has the expertise and the network to not only track the developments and their impacts on the energy market, but also evaluate them.