Personal Investing
Jonathan Wright, Fidelity Personal Investing 21 Jun 2017 01:50pm

Going green

SPONSORED FEATURE: An important event happened in Great Britain earlier this month and I’m not just referring to the general election
Caption: Renewables and the opportunity for income investors

On Wednesday 7 June, the day before we headed to the polling booths, the National Grid, the body that owns and manages the power supply around the UK, said in a tweet, "For the first time ever this lunchtime wind, nuclear and solar were all generating more than both gas and coal combined."

Put simply, renewable energy powered half the country that day. It’s the first time renewables have provided more electricity than coal and gas. Add in nuclear, and by 2pm low carbon sources were producing 72.1% of electricity in Great Britain.

The weather that day was sunny and windy - unusual but perfect conditions for boosting the power available from solar and wind sources.

It is the third milestone passed this year in the country’s quest for cleaner power. In May, the National Grid reported that solar had broken another record in the UK, providing 8.7 GW of power, or nearly a quarter (24.3%) of the nation’s requirements. In a country not known for its sunshine that’s quite an achievement.

Also in April, Britain had its first no coal day, which was the first time in 130 years that we went a day without having to turn on our coal-fired power stations. As recently as two years ago coal was still accounting for 23% of electricity generation, this is now nearer to 9%.

As we increasingly turn away from traditional fossil fuels towards renewables, the need for sustainable sources to generate electricity has never been greater. This is especially true as the car industry follows Tesla’s lead towards launching new fully electric powered vehicles. While electric vehicles will be a welcome solution to the need for cleaner air in our cities, if the extra electricity required to power them does not come from green sources the net effect is counter-productive.

Green energy offers many opportunities for investors sometimes in less obvious ways. Renewables can be a good option for investors seeking income because they tend to be financed through long term contracts ranging from 10-30 years so they provide a steady stream of cash that supports the income that investors are looking for. Additionally there is a very strong regulatory push to increase renewables into the energy mix also boosting their long term appeal.

Energy companies, already popular with income seekers in search of strong dividend yields are very much aware of this. BP has been producing renewable energy for more than a decade and has the largest operated renewables business among their oil and gas peers. With renewables projected to grow seven times faster than all other energy types combined, they will play an increasingly important role in a lower carbon future, one that BP and other oil majors can’t afford to ignore. BP’s particular focus is on biofuels and wind farms to complement their existing oil and gas exploration activities.

Fund managers looking for companies with a history of paying dividends have seen the attractions of BP. With a dividend yield currently of 6.7%* it is one of the top 10 holdings in the JOHCM UK Dynamic Fund, JOHCM UK Equity Income Fund, Liontrust UK Growth and Majedie UK Equity Fund. All these funds feature on our Select 50 list of preferred funds.

Unlike the Fed which raised interest rates in the US last night, there are no signs of a rate rise yet in the UK, forcing savers to find new ways to generate an income. Investing in green energy and the infrastructure required to provide it will continue to play an important role in helping income hunters as well as the environment.

Source: *BP, 14 June 2017. This yield is not guaranteed

Jonathan Wright

Jonathan Wright

Jonathan graduated from Coventry University with a degree in business administration. He joined Fidelity in 1997 and has worked in a number of different operations and marketing roles in the UK and India. He is currently a senior production manager for the Markets and Insights team in Fidelity’s Personal Investing Channel.

Register for a 10% Personal Investing discount with Fidelity

Important Information

The value of investments and the income from them can go down as well as up, so you may not get back what you invest. Past performance is not a reliable indicator of future returns. Reference to specific securities or funds should not be construed as a recommendation to buy or sell these securities or funds and is included for the purposes of illustration only. The Select 50 is not a recommendation to buy or sell a fund. This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a recommendation for any investment. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. Fidelity Personal Investing does not give personal recommendations. If you are unsure about the suitability of an investment, you should speak to an authorised financial adviser.