Fidelity Investments is the world’s biggest investment manager. It has more than $1tn in its custody, and its hard-nosed managers scour the world to exploit the best profit opportunities. It believes in the efficiency of free markets. Pinko-lefty Guardian types are thin on the ground.
Yet the organisation recently sent five of its top money managers to a solar-power conference in Spain, not because it wants to tackle climate change, but because it believes solar power will be a money-spinning industry of the future. Fidelity is investing heavily in hi-tech solar- and wind-power companies, where German, Danish and Spanish players lead the world.
Colin Stone, manager of its top-performing European Opportunities fund, includes companies such as Denmark’s Vestas and Germany’s Q-Cells in his portfolio. He believes that we’ve only started to scratch the surface of a massive new growth industry. “We have a high degree of confidence that solar will hit grid parity by 2011 in Spain.” In other words, green power will soon be the same price or even cheaper than dirty power. It’s a fabulous prospect.
But thank the Germans rather than the Spanish, and thank old-fashioned state intervention rather than free market economics. As Stone acknowledges, “the application of early government spending has helped to jump-start this industry. Without the subsidies, the whole industry would be many years behind in reaching grid parity”.
The principal subsidy was in the form of a “feed-in tariff” forced on German utilities by Bundestag member Hermann Scheer, who has been a fierce advocate of renewables for more than 20 years. German households and businesses that generate renewable energy can sell it back to the grid at more than triple the market price.
Today in Guardian Money we highlight a small-scale hydro-power project in Settle in the Yorkshire Dales. Unlike in Germany, the scheme has to finance itself in Britain’s brutal, deregulated free utility market. It will sell energy to the grid - but only at the price a utility chooses to pay. If such schemes could benefit from a feed-in tariff, they might spring up across the UK. They have in Germany, where 15% of the country’s energy already comes from renewable sources - a rise of 11% in just eight years. By 2030, the 100% target will probably have been reached.
But in Britain, our government is timorous in the face of the energy oligopolies. We dare not upset shareholders with windfall taxes. We dare not impose feed-in tariffs. Instead we launch a £910m package of energy efficiency measures that over a three-year period is equal to just over £50m annually per big-six utility. And they’ll claw that back (and more) with price rises.
On Monday, business secretary John Hutton unveiled a new manufacturing strategy, claiming Britain could create 260,000 jobs in the renewables industry. Given the head start the Germans have in solar and wind, it’s unlikely British companies will now catch up. (Although as an island, the prospects for wave power are intriguing.) Oddly, the Conservatives are promising to introduce a feed-in tariff. It would be a far more agreeable policy for Labour to pinch than inheritance tax giveaways.
Source - The guardian
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