Smart Energy Monthly Report | February

14 February 2022

Smart Energy ETF Monthly Report: Key Takeaways

US CPI inflation closed 2021 at 7%, the highest price increase since 1982, making the Fed hawkish. [1] US Fed is likely to start increasing interest rates starting in March, triggering a repricing of stocks. [2] In California, the Public Utilities Commission (CPUC) is considering a $8/kW per month tax on local solar (vote on this now delayed to February 10th) that could put an end to net metering prospects in the state. [3] Meanwhile, at the federal level, Senator Manchin killed Biden's Build Back Better Act before Christmas. [4] This “perfect storm” triggered the market correction we have observed since mid-November, severely penalizing green growth. DGEN is down 17.42% in January alone, and is down 30.8% since its 2021 pick achieved on November 12th. In DGEN, 11.1% of companies are down more than 30% since January and 57.4% of the companies are down more than 30% since their 52 week peak prices. In this 1st month of the year, S&P500 was down 5.3% and Nasdaq down 9%. Often analysts are justifying the sell off by saying that companies with “story stocks”, those with no operating cash flow, merit a valuation reset. At the end of the month, 73.06% of DGEN weight represents companies with positive TTM EBITDA. Moreover, we argue here that green growth i) is different from tech growth, and ii) is now severely oversold. We will also show that contrary to Armageddon causing a massive downward revision of growth prospects, we see robust evidence of acceleration of adoption of key Smart Energy solutions. 

Please note that all performance figures are showing net data. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product.


Is Green Growth Now for Sale? 

The IEA in a revised forecast states that renewable power will reach more than 4,800 GW by 2026, accounting for 95% of the increase in worldwide power capacity in this period. [5] Bloomberg NEF sees 2022 as the year when, for the first time ever, over 200 GW of new solar will be added to systems globally. [6] The US EIA expects solar to account for almost half of all the new generating capacity of ca. 46 GW that is to be added to the grid in America in 2022, that means 21.5 GW of utility scale solar to start operation in 2022. [7] Within green energy undeniable growth potential and global tail winds, we see Smart Energy, defined as decentralized, digital and decarbonizing, as one of the most disruptive trends. The key reason behind the increasing adoption of distributed energy in a self-production solution is cost. Paradoxically, we make the point that “fossinflation”, as we call the energy driven persistent part of the US CPI increase, is going to further accelerate adoption of local solar + battery and benefit DGEN. Local solar production + storage makes economic sense and higher electricity retail rates due to NatGas and coal prices only accelerate adoption of DGEN’s low carbon alternatives. The benefits of a decentralized electricity system are not exclusive to the owners of distributed solar rooftops & battery assets. Battery storage for clean energy in behind the meter applications allows “prosumers” to support grid stabilisation by storing electricity and discharging it back into the grid at peak times, helping meet supply and demand. V2G, VPPs, local solar and the EV Charging network are solutions that make DGEN a unique ETF. Long term tail winds indicating relevance of the technologies and the companies behind them is misaligned with short term volatility of “all themes growth related”.


Acceleration of BEV Sales and the Infrastructure of the 21st Century

The acceleration of BEV sales in 2022 and years ahead will represent a massive volume of behind the meter mobile energy storage capacity, mostly sitting idle as batteries parked on driveways. The bidirectional flow of electricity from EV batteries, V2G, enables power systems to rely on intermittent renewables, while being used by network operators to respond to grid needs. Evidence of BEV acceleration of adoption and change in consumer sentiment was clear in 2021. As reported by Ark Invest, in 2021 global sales of Battery Electric Vehicles (BEV) went up by 112% (from ca. 2.3 million to ca. 4.8 million units), while in the same period sales of Internal Combustion Engine (ICE) were up 1.7%. In Europe the EU proposes a ban on new ICEs sales by 2035, but adoption is already ongoing and car sales of pure BEVs overtook sales of diesel cars for the first time in December 2021 (BEV at 20% market share and diesel now at 19%; car sales of BEVs + plug in hybrid + hybrids overtook that of diesel cars in Europe back in September 2020). [8]

Despite the acceleration of BEVs in the US, and the fact that the charging network is seen as a pre-requisite for BEV adoption, EvGo (EVGO, down 17% in January), ChargePoint (CHPT, down 27.3%), Blink Charging (BLNK, down 21.12%) all suffered massive corrections. ChargePoint is the biggest of the three names by market cap (at $4.5 billion), it has a large network with drivers plugging into a ChargePoint network approximately every two seconds. [9] It sells hardware, subscription software and services and cumulative 3Q21 over 3Q20 sales almost doubled, to $115 million. CHPT pursues a parking model, based on subscription fee that is not utilization or energy dependent. Evidence that charging points attract customers, EvGo, the US largest public fast charging network and the only public network powered 100% by renewable energy, and Meijer, a Midwestern “one stop shop” concept retailer, announced this month the opening of the first EVgo public fast charging station at Meijer location. [10] This is part of a partnership that will add to the over 800 fast charging locations to EVgo’s network. EVGO grew revenue by 73% in the last quarter and booked positive EBITDA of $29.9 million in 3Q21. [11] It is the smallest of the three by mart cap at $567 million, currently at the same level as its MRQ cash position of $520.4 million. Stunning evidence of markets overselling a company: robust sales growth and positive margins, but market cap is at the same level as the company’s cash position. This is where EVGO is.


Local Solar Becoming Mainstream, Foss-inflation Helping on Price Competitiveness

Bloomberg NEF Predictions for 2022 is bullish on local solar. [12] In their view, “Residential solar-and-storage will be on the political and investment agenda with greater urgency than in previous years, as it is starting to be a significant sector. In Hawaii, nearly all new residential solar systems are now built with storage; Germany, about half include storage; while in Switzerland about 15% do.” Moreover, they say “we expect by the end of 2022, there to be at least two further markets we know of that have more than 50% storage attachment rates.” 

Sunrun (RUN, down 24.4%), Sunpower (SPWR, down 19.6%), Sunnova (NOVA down 29.58%) are three of the key players in the US “local solar” market. Sunrun is the leader in residential solar in the US, with the highest market share. Analysts challenged its valuations after the company went up by over 400% in 2020. RUN now trades at a $5.4 billion market cap, being down almost 70% from its January 3, 2021 peak. What happened in the last 12 months? RUN nearly doubled its revenue from cumulative 3Q21 over cumulative 3Q20 (from $601.8 million to $1.17 billion [13]), at end of last September RUN had a network solar energy capacity of 4.5 GW, a 20% increase over prior year, and a cash position of  $0.93 billion. [14] The company will be reporting 4Q21 figures on February 17th and we will be watching closely as the company the epitomizes the idea of local solar reports the most robust evidence of adoption of behind the meter solutions in the US residential market. 

Enphase (ENPH, down 24.98%) and Meyer Burger (MBTN.SW, down 22.13% YTD) are great examples of companies very well positioned to gain from the acceleration of solar capacity, behind the meter employment in particular. Enphase is the world’s leading supplier of microinverter based solar & battery systems. Enphase will report 2021 annual figures on February 8th, but 3Q21 numbers already indicate a solid year, as $351.5 million in revenue in the quarter were up ca. 97% over 3Q20, gross margin at 40% translating into net income margin above 6%. [15] The company is very well positioned to capture the 10x solar US growth potential and 100x clean energy storage, which is also motivating Meyer Burger, a Swiss based company with high end solar rooftop solutions. Planning to get to 5 GW of capacity, [16] the company gives guidance of €500 million in sales in 2023, from ca. €17 million in the first half of 2021 [17] and entered the US market with a new facility in Arizona that start operation producing 400 MW of solar modules. [18] ENPH closed the month at ca. 52% below its 52 week peak price, while MBTN is down 39.8% from its 52 week peak.

Please note that all performance figures are showing net data.


V2G, VPPs, LDES & Solving Renewables Intermittence

A predominantly renewable based grid requires storage. In the short term, leveraging all existing batteries will be very relevant. That is why Long Duration Energy Storage (LDES), Vehicles to Grid (V2G) and Virtual Power Plants (VPPs) are poised to proliferate in the next ten years. It makes economic sense to use the mobile storage inside electric vehicles and all stationary storage behind the meter and several companies have developed the technology that allows the use of these storage assets.  Starting in 2022, all EVs produced by Volkswagen will be bidirectional, being able to discharge electricity back to the grid. VW joins Nissan, Kia and Mitsubishi which have all launched V2G enabled BEVs from as early as 2013. Ford starts the production of its V2G truck, the F150 Lightning in the spring of 2022. Incumbent OEM names are making the technology mainstream, and aggregators of the distributed battery assets are developing solutions, similar to what Uber and AirBnB did for cars and homes. 

Two of the worst performing stocks in DGEN are within the clean energy space, a potentially over 100x story in the US alone until 2035, as we elaborated in this article. [19] Stem (STEM, down 35.27%) is an "energy storage-as-a-service" business model and expects its revenue to grow at 50% CAGR from 2021 to 2026. [20] The company is a player in both the Behind the Meter and Front of the Meter applications. Nuvve (NVVE, down 50% in the month) the only pure listed V2G player, is a 10-year-old California based company. The company sees their services lowering the cost of EV ownership, while supporting the integration of renewable energy sources. Nuvve’s customers are fleet owners, building managers, municipalities, and public organizations such as school districts. When EVs are plugged in, clients transform their EV units into grid-integrated energy storage resources (while guaranteeing the expected level of charge for when the vehicle is needed for transportation).  

We believe current valuations in DGEN are not pricing in this incredible potential. These forecasts of global climate change mitigation efforts, modernization of the grid, electrification of transportation & heat, translate into unprecedented investments. That is even further revenue growth for companies that are already expanding fast.  That’s why we believe there will be a turnaround to stock performance for these companies, perhaps triggered by a clear signal like the passage of the climate portion of Biden’s Build Back Better legislation slated for later this year, before the autumn Congressional elections.   Temporary supply chain issues do not point to curtailed demand, and DGEN companies with proven revenue-generating products that are alternatives to traditional emission-heavier ones are not suffering from lower growth for their products and services. As voiced by Larry Fink, the head of BlackRock, in his annual letter this year “This is just the beginning.”  


Smart Energy ETF Performance (as of 31.01.22)








iClima Smart Energy UCITS ETF (Acc)







iClima Distributed Renewable Energy Index







Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/01/2022

Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such a strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Please note that all performance figures are showing net data.


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