Football was not the only reason why Munich was busy last week. In appropriately warm and sunny weather with the mercury touching 29 degrees, over 80,000 people – your author included – descended on the smarter E Europe. This major three-day conference-cum-exhibition embraces energy with a particular focus on solar and battery storage, both future trends that are likely to grow in importance. More than 3,000 businesses from across the world were present as well as a range of industry leaders.

What stood out most clearly was the significant presence of Chinese vendors and the relative absence of their US counterparts. American vendors, we were told, were not as willing to be commercial (i.e. reduce) prices and currently prefer to focus on their domestic market, given the size of the opportunity. If anything, Chinese corporates appear keen to gain market share in Europe, ahead of a potentially more adverse political climate. Best estimates, we learned, suggest that 70-80% of all utility/industrial-scale solar sold in Europe currently comes from China.

Demand for solar is clear. The three reasons most commonly cited were: as a source of hedging against volatile power prices, attractive payback times (given the falling prices of panels) and as a response to data centre requirements. Data centres have high density and are power intensive. They consume 10-50 times more energy than per square metre relative to a typical commercial office space, according to information from McKinsey shared in a presentation. The major hyperscalers are already the largest buyers of PPAs (purchase power agreements, typically with utilities) for renewable energy in Europe. Looking forward, many solar businesses are seeking to partner with wind and battery peers in order to develop ‘energy clusters’ to serve these customers more effectively.

This should be good news for the industry but we were reminded by several participants that “action is needed on a major scale” if grids are to keep up with the energy transition. Upgrading grid infrastructure, we were told on many occasions, is a “multi-year event” that requires industry-wide cooperation and political buy-in. Fewer than 50% of Europe’s nations have “appropriate plans,” according to industry body, SolarPower Europe. Other challenges for the industry include permitting (particularly in France and Italy) land availability and access to financing. Consider these issues as potential clouds cast on what should be a broadly sunny outlook for solar.

26 June 2024

The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.

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Alex Gunz, Fund Manager

Photos by the author.

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