Smart Energy Monthly Report | March

10 March 2022

Putin invades Ukraine - the Energy Transition Accelerates. DGEN may represent the only short-term solutions for consumers of electricity

  • Monday February 28th was the day markets realized that green growth is a theme of its own:  On the last trading day of the month, the S&P500 fell as much as 1.6% and then recouped to finish at 0.2% lower, whereas the Dow Jones fell 0.5%, while CLMA closed up 3.25% in the day and DGEN 4.52%, showing signs that markets are starting to see the acceleration of the transition as beneficial to green growth. Risks and lack of conviction abound as the length of the war in Ukraine is unknown and with profound impacts to global economy, but the indication that green growth benefits from tailwinds is relevant. Fossinflation will persist even if peace talks are successful. Energy inflation only makes the competitiveness of clean energy and decarbonization solutions more compelling. A more prolonged war in Ukraine could shake global GDP and decelerate global economies, which means the US FED and ECB would be unlikely to keep their hawkish most recent stance. 
  • Both short and long term solutions to the energy crisis accelerate in adoption: We expect to see more acceleration of the long term energy transition, case in point being Germany, that just announced legislation that brings forward the goal of becoming 100% renewable grid by 2035 (a goal to be reached 15 years faster, as previous goal of fully green grid was 2050). In the short term, our view is that there are only two solutions for the crisis: energy efficiency and consumers embracing self-production, embracing behind the meter solutions like solar panels + batteries. This is not the first fossil fuel energy crisis, but it is the first time where effective solutions that are price competitive are in place. President Biden in his State of the Union address on March 1st only mentioned climate change once. The lack of support for the Build Back Better (BBB) package, that included $0.55 trillion of investment towards climate change mitigation, precluded the legislation from passing. Some analysts expect a revised bill to be put forward in the summer. The BBB bill included an extension of the Solar Investment Tax Credit (ITC) for 10 years at 30%, which certainly would provide momentum to key solutions, such as distributed renewable energy. 
  • Prior to the invasion, the month was marked by enhanced concerns over inflation: Europe was already in an energy crisis prior to Russia’s troops invading Kyiv on February 25th. The energy crisis has been fundamentally a NatGas crisis, with LNG dispatched internationally to the highest bidder and energy is a bit component of persistent, global inflation. The Consumer Price Index in the US was released of February 10th, at 0.6% in January and 12-month urban CPI reaching 7.5%. The consensus was that the US Fed would be increasing the short term benchmark rates at the March 15/16 meeting, potentially as much as a half point rate hike. However, sanctions to Russia could cause a global slow down on GDP growth and although fossinflation will persist, hawkish sentiments at central banks may subside. In two weeks, we will have indication on Fed’s revised views on inflation and interest rate increases. 
  • Our view is that “green growth” in a world of volatility and uncertainty is the investment theme likely to do very well: Users of electricity seek security of supply and stability of prices. Energy efficiency and producing electricity at the point of consumption, mostly from solar rooftop panels, are the key short-term solutions that users of energy can control. DGEN is the only ETF that represents behind the meter solutions. Green growth has suffered severe drawdowns (as we will show below) since mid-November last year. Given the selloff that all names in DGEN have recently suffered it means that this theme that is the most relevant, topical, global theme, is at an attractive entry point in terms of valuation.


Acceleration of Adoption – Australia “Local Solar” is already material, UK National Grid reveals forward thinking on V2G, and California supports LDES

Since the Biden administration re-joins the Paris Agreement, we have observed increase in adoption of a variety of climate change solutions, from positive consumer sentiment towards BEVs to the most long term investment into green hydrogen. We are observing material acceleration of relevant climate change solutions, and the current geopolitical tension only puts more impetus on import countries to transition away from fossil fuel. We share the following positive news and developments observed in February - from California to Australia, to the UK:

  • Australia adoption of solar rooftop has been strong, and country reached almost 8% of electricity met by “local solar”: PV Magazine announced that Australia reached 25 GW of solar capacity at the end of 2021. As a country of ca. 25 million people, that is nearly 1kW of PV installed per capita, a world record. Of all the solar capacity, rooftop solar plays a key role. In Australia’s energy mix, it represented 7.9% of the National Electricity Market (NEM) in 2021. Almost 8% of all electricity supplied in this large grid (covering 5 regions) came from behind the meter solar. Bill Nussey in his very well researched book Freeing Energy (available on Amazon) explains why. Australia benefits from a single set of national regulations that are "reflected in a simple, standardized, and automated process". Soft costs are low, adoption increases. The magazine also shared additional great news as in last December, South Australia state ran for 156-hour powered by wind, rooftop solar and utility-scale solar farms (firmed by fractional amounts of gas). At the end of February, the Australian Energy Market Commission announced a package of new rules that allow distribution network businesses to supply customers withing the NEM with solutions such as microgrids and individual solar + battery systems, whenever price competitive. As we like to say, the solution to the energy crisis is very local, as behind the meter renewable sources are embraced by users looking for security of supply and energy savings. 
  • UK National Grid clears the path to 100% renewable grid and show signs of how big V2G can become: On February 14th the UK became the first country to change its “Grid Code” so that Renewable generators can now provide stability services to National Grid Electricity Supply Operator (ESO). The Grid Code defines all the electricity providers that can be connected to the grid to provide stability services such as inertia and frequency support. From this month, UK wind, wave and solar generators will be able to offer stability services that were only delivered by conventional fossil fuel-based generators. Tony Johnson, head of the National Grid ESO’s markets team, said: “This is a breakthrough moment, a key piece in the energy transition jigsaw.” The UK National Grid also grabbed media attention as Octopus Energy disclosed it is running a V2G trial together with the ESO, so that in the future the grid can rely on excess electricity stored inside bidirectional EVs. The average EV can transfer 7 kWh of power while the average UK house uses 3 kWh at peak time. That leaves 4 kWh free to be exported to the grid at a rate of 15p per kWh (so 60p per hour). As the article suggest, multiply that unit figure by one million and a total of 4 GWh (equivalent to over 5,000 onshore wind turbines) and we can see why the ESO is interested in V2G as a solution to peak needs. 
  • California parks its solar rooftop tax proposal and sets procurement indication for an unprecedented amount of new clean energy investments: The California Public Utilities Commission (CPUC) decided to “indefinitely delay its decision” on the very criticized net metering laws that proposed a $8/kW per month tax on solar rooftop installations. Also, on February 16th the Commission unanimously approved plans to add ca. 19 GW of utility scale solar, ca. 6.7 GW of wind and 15GW of battery energy storage systems in the state by 2032 (as well as 1,000 MW of demand response resources). That would bring renewable resources to represent 73% of CA’s energy mix by 2032. 


DGEN in February – We Rebalanced both CLMA and DGEN. Broad market Sell off continues but green growth had strong trading days indicating potential recovery

First week of February was rebalancing week for DGEN, with two new names being added to the fund, namely Fluence (FLNC, down 27.65% in the month), and Volta (VLTA, down 8.54% in the month). DGEN was up 5.65% in February, and is now down 12.87% YTD. In the first week of the month, the Bank of England and ECB joined the US Fed in voicing concerns over inflation and indicating future rate increases. As Buffett said many times, interest rates are like gravity. What followed the hawkish comments was more than risk free rate repricing on both sides of the pond. Russian invasion of Ukraine exacerbates the energy crisis in Europe but adds to the need to accelerate the energy transition and decarbonization of the power sector. As a consequence, green growth is now on sale. We see current valuations as a very attractive entry opportunity for DGEN. We give evidence of the incongruent valuation levels we are seeing. Markets have rotated towards value, and some large cap names now trade at valuations at high multiples. For example, Microsoft is trading at a ca. 12 P/S, having reached closed to 15x earlier in the year. As we show below, most of the companies in our universe trade at P/S multiples below that of Microsoft. In line with the rotation towards more stable, larger cap names, within DGEN we observed more severe correction in the small cap and mid cap stocks versus large cap ones. We argue that green growth is the only theme with effective solutions to the energy crisis, benefiting from both short term and long-term tail winds.

Drawdowns from 52 week High x Current P/S Multiples in the DGEN Universe

Source: iClima Research, figures as of Thursday Feb 24. For illustrative purposes only. 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.

  • DGEN is currently ca. 85.7% growth and 14.3% value. 
  • Currently ca. 57% of constituents are US based companies.
  • DGEN is 33.12% represented by companies with a market cap below $2 billion.

Source: iClima Research, figures as of Thursday Feb 24. For illustrative purposes only. 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.

  • DGEN is 31.64% represented by companies with a market cap between $2 and $10 billion.

Source: iClima Research, figures as of Thursday Feb 24. For illustrative purposes only. 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.

  • Companies with market cap above $10 billion represent 33.49% of DGEN (TSLA is the only Mega market cap stock in DGEN).

Solid Earnings Season Started With TSLA reporting in January. Growth is robust, trouble remains supply chain related

  • FLNC (down 27.65% in February) is a new name in DGEN. The 14 year old company went public via traditional IPO last October (when it raised $1 billion in new capital), it is a JV between US IPP AES Corporation and Siemens. Fluence is a global leader in energy storage solutions, with 3 GW of energy storage deployed in 30 different markets and more than 4 GW of storage assets optimized for renewable energy plants that use Fluence IQ service platform. The company now has a market cap of $2.09 billion, while at time of IPO its market cap was $4.7 billion. What happened between IPO and now? Many great things. Fluence announced last January a JV with Indian ReNew, to cater to a market projected to reach 27 GW/108 GWh by 2030, as India targets a 50% renewable grid by 2030. Fluence announced a partnership with Quantum Scape (not on CLMA or DGEN) to introduce solid-state lithium-metal battery technology to stationary energy storage applications. Also, Fluence closed their FY (that ends in September) at total revenue of $681 million (up 21% YoY), Fluence announced 1Q22 earnings on Feb 9th and reiterated revenue guidance for FY2022 of $1.1 billion to $1.3 billion (TTM at $739 million). We highlight that the company’s current cash position (after repayment of $100 million of debt) is $850 million, representing 41% of its current market cap. Fluence is a company with strong capital structure, in an industry expected to grow over 100x in the next 10 years, a solid moat in their IP and robust track record. At 1.6 forward P/S it is one of many examples of a company in our universe that is oversold. We highlight that the company is not immune to short term headwind likely to come from shipping and supply chain disruptions. 
  • EVGo: EVGO (up 25.7% in the month) is the largest fast charging network in the USA. The company now trades at $2.66 billion market cap, which is 53% below its 52-week peak. What happened in the past year? The company expanded its partnership with both Uber and GM, saw customers grow from 250,000 in May to 310,000 customers in September. Revenue guidance for the year was increased, to $20 to 22 million (revenue grew 29% between 3Q21 and 2Q21), and an EBITDA loss of $54 million for the year. At the end of 3Q21, the company had a cash position of $520 million. This is another company with solid growth prospects, growing in line with the EV adoption acceleration (in 2021 global sales of BEVs went up by 112%, from ca. 2.3 million to ca. 4.8 million units). Earnings release for the year at end of March.
  • Sunrun: RUN (up 5.21% in February) epitomizes the idea of “local solar”, as the largest residential solar rooftop player in the US. Shares were up over 400% in 2020 but are now 59% below 52-week peak and market cap is now at $5.86 billion. RUN has a Solar-as-a-Service model, with USP being the financing of the panels (a zero down payment solution). Total revenue in FY2021 reached $1.6 billion, up $687.8 million, or 75%, from 2020 sales. Cash & restricted cash as of December 31st, 21 reached ca. $850.3 million. Currently, only 3.5% of the 77 million addressable homes in the US have solar, indicating a lot of growth potential as homeowners are increasingly interested in solar + battery solutions for security of supply and savings. What turned sentiment against RUN? Uncertain legislation. Length of US Federal solar tax credits is under question (currently at 26%, reduced to 22% in 2023 and ending in 2024) due to Build Back Better debacle (tax credit was to be extended & raised in BBB, until 2034 and raised to 30%), and California legislator that considered a $8/kW per month as solar tax has hurt prospects for RUN (CA is home to ca. 40% of all US residential solar and is the largest market for RUN). Sunrun moon-shot is to become a VPP leader and the company has 12 VPP contracts in place.  

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.


Smart Energy ETF Performance (as of 28.02.22)








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 28/02/2022

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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