Decarbanisation and Smart Energy Monthly Report | July

26 July 2022


Covid still afflicts economies, in its 4th month the war in Ukraine continues to put pressure on commodity prices, inflation remains out of control, and interest rates increases continue to be used as the solution to spikes in CPI. These forces are now overwhelmingly seen as a precursor of global recession. Equity markets in June reflected fears of a structural and prolonged shift from cheap capital promoting global growth to more expensive funds and a stagnating macro environment. At the beginning of the month, the World Bank released a revised forecast for global growth, from the 4.1% estimated in January to 2.9%; a material reduction.[1] A repricing followed the news of global slowdown and the S&P500 had its worst first half since 1970, down -20.6% YTD and down -8.4% in June alone.[2] The Dow Jones index was down -6.21% in June (down -11.14% YTD), while Nasdaq tumbled -8.05% in the month, closing the first half of the year down -24.06%. In Europe, it is worth mentioning that the German DAX index was down -11.07% in June alone (down -18.12% YTD), as the country’s economy deals with the implications of Russia cutting gas supplies. In the second week of June, Gazprom cut the flows through the Nordstream 1 pipeline by 60%. [3]

The iClima Decarbonisation Enablers Index was down -6.81% in the month and closed the first half of the year down -19.66%, while the the iClima Distributed Renewable Index was down -12.69% in June and closed the semester down -30.65%.

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.

China rebounds and stock market performance for the Hang Seng and CSI 300 Index were positive, in what was a sea of red for the main global equity exchanges. Despite the deteriorating macro environment, Chinese equities performed well in June. The Shenzhen index was up 9.39% (still down -14.59% YTD), benefiting from Chinese regulators taking a lighter approach towards technology firms, and the Covid resurgence being under control, prompting the government to lift pandemic related travel restrictions. [4]

European countries start executing on the plan to restart coal fired power plants, in an effort to preserve natural gas reserves. Coal burning related emissions are thus likely to increase in Europe. The consequences of the reduced flow of natural gas from Russia that started this month are profound. In the long run, Germany will decarbonize its energy sources and renewable energy will replace Russian hydrocarbons, but in the short term the alternative is to replace natural has (that can only be either liquified as LNG and then transported or sent via long pipelines) with coal (that is transportable in bulk) for electricity needs and store the natural has still being supplied for heat purposes ahead of next winter. This is the “trilemma” that the energy transition faces: to balance out security of supply, affordability and decarbonization. Germany, Italy, Austria, and the Netherlands have all announced plans to restart coal fired power plants; Germany’s Economy Minister Robert Habeck, a Green Party member, referring to the decision as “painful but a necessity”.

Tesla launches a Virtual Power Plant operation in California, in what constitutes the largest distributed battery in the world. On June 25th Tesla announced a partnership with PG&E to support the electricity grid by aggregating existing Tesla Powerwalls (with storage capacity of 13.5 kWh) and dispatching electricity above “backup reserve” levels when the grid is in critical need of additional power.[5] The owners of the 50,000 existing Powerwall stationary batteries will be able to earn $2 per kWh dispatched during events when the grid is under stress. Subject to the duration of the events and the number of Powerwall units in the building, a homeowner could earn between $10 to $60 per event, potentially more in the case of larger systems. Owners of behind the meter Tesla storage just need to opt into the push notification in the Tesla App. This project turns Tesla into a major “decentralized electric utility”, according to Electrek, operating in Australia, now in California and soon in Texas.[6] For ageing grids with higher chances of brownouts, this decentralized solution is one that improves reliability in a timely and affordable way.

The Supreme Court of the United States made headlines during the month, with the reversal of Roe versus Wade followed in the last week of June by a restriction of the role of the Environmental Protection Agency (EPA) in regulating the GHG emissions of power plants. The EPA had been granted regulatory powers under the Clean Air Act and the decision to strip power from the agency will make it much harder for the US to meet the goal of cutting GHG emissions in half by 2030. In the words of climate scientist Daniel Swain at UCLA: “Regulating greenhouse-gas emissions from the electricity sector, and point-source emitters like power plants in particular, is arguably the `lowest hanging fruit’ in mitigating climate change.[7] If we can’t make rapid progress on the easiest aspects of emissions reductions in the short term, that does not bode well for reaching any number of optimistic climate targets in the coming decades.” The decision to shut down coal fired plants will now be predominantly an economic decision, with coal up over 180% YTD, trading in the $400/ton range. The demand destruction of coal presents the best chance of reducing emissions from this emissions-intensive source of electricity. [8]


Pursuing long term investment strategies amid short term fears of economic retraction can be devilishly tricky. Stagflation has hurt growth companies in the first semester, as investors have overwhelmingly discounted future cash flows at expected higher rates. Raw materials price increases and labour cost spikes combined with lower consumer confidence and spending reductions are indeed reasons that are likely to cause deterioration in sales growth and lower profitability for broader growth themes, from disruptive technologies to digital infrastructure to biotechnology. Old economy sectors, fossil fuel related companies in particular, had a strong first half of the year, with companies like Shell PLC (up 20.71% YTD), Exxon Mobil Corp (up 46.15% YTD), Marathon Oil Corp (up 38.19% YTD) benefiting from the extra cash flow that triple digit crude and natural gas prices generate in the short term.

&However, the mid to longer term growth prospects of green solutions – from EV adoption to long duration energy storage (LDES) – are extremely strong, led by German and EU efforts to replace Russian fossil fuels. That means that longer term investors have a unique opportunity to invest in the companies leading the energy transition at a steep discount. How fast that strategy will yield solid returns will depend on the fate of fossil fuel prices. Below we summarize the four possible scenarios that we expect markets to price in over the course of the next 24 months: A “green swan” case where fossil fuel investments increase and expected production goes up but the energy transition accelerates and prices from crude to gas collapse (as they did in the first lockdown, when 20% of global demand evaporated and crude for the first time ever traded at negative prices), to an “Orderly” case, where a fast transition somewhat balances a lower demand for FF with a lower supply, to a lower transition case where both green and brown stocks “Coexist”, to the extreme case of the “Revenge” of the old business-as-usual (BAU) economy. This last case seems to be what markets are pricing right now, not considering that the historically high fossil fuel prices could promote a demand destruction that only further prompts the substitution of hydrocarbon commodities.;



EV Segment

In 2Q22, Tesla (TSLA, down -11.2% in June, down -36.3% YTD) delivered 254,695 BEVs, compared to 201,250 BEVs in 2Q21 and 310,048 in 1Q22.[9] This 26.5% YoY growth fell short of expectations, but supply chain challenges, semiconductor chip shortages and a recent lockdown in Shanghai posed challenges to Tesla’s output levels. Tesla’s soft guidance for long term top line growth is 50%. Sales for the US market for the first semester are not out yet, but in Europe the most recent figures, released at the end of May, indicated BEV sales were up 20% YoY, representing 11% of all new units sold in May (PHEVs represented 8% of all units.[10] Nio (NIO, up 24.9% in June, down -31.4% YTD) had a positive month, benefiting from a change in sentiment regarding Chinese stocks, from a benevolent report by Morgan Stanley upgrading the company to Outperform, and positive sales figures for June.[11] Nio reported 12,961 units delivered, a 60.3% YoY growth, bringing sales in 2Q22 to 25,059 BEVs, a 14.4% YoY growth.[12] The battery swapping BEV maker in May listed its share in a third exchange, being the first auto company to be listed in HK, NYSE and now in Singapore. [13]

China based BYD, Xpeng and Li Auto reported even better sales figures.[14] Xpeng (XPEV, up 35.06% in June, down -36.9% YTD) sold 34,422 BEVs in 2Q22 including 15,295 in June alone, more than doubling the figure sold in June 2021. Meanwhile, BYD (BYDDF, up 12.14% in the month, up 17.78% YTD) sold 355,021 units of BEVs and PHEVs in 2Q22 - up 256% over 2Q21 - while Li Auto (LI, up 52.81% in June, up 19.35% YTD) sold 28,687 units of BEVs and PHEVs in 2Q22 - up 63% YoY. The graph below shows BYD and Li Auto as the pure players in the electric automaker space with the lowest drawdown levels in this very negative year for share performance, with BYD trading at 4 P/S (TTM sales).





Note: BYD and Li Auto are up YTD, negative drawdown refers to drop from highest share price within the last six months.


Fuel Cells

Green hydrogen has been likened to a Swiss army knife, for its potential use for a variety of decarbonizing solutions, from long duration energy storage, to blending with natural gas to a fuel for hard to abate heavy transportation segments.[15] A strategy to invest towards a (green) hydrogen economy is through shares of companies in the fuel cell and electrolyser segments. Plug Power (PLUG, down -10.34% in June, down -41.30% YTD) is the largest market cap name (ca. $10 Billion), with Bloom Energy (BE, down -5.82% in June, down -24.76% YTD) the company with the largest revenue in the universe of 10 names in the iClima Decarbonisation Index. Bloom makes solid oxide fuel cells (SOFC), which are at present predominantly fuelled by natural gas, while PlugPower makes proton exchange membrane (PEM) cells that run fully on hydrogen, operate in lower temperatures and can start and stop fast, making them suitable for transportation applications. IRENA last month released a Global Hydrogen trade cost, projecting that at sub $2/Kg “total demand for hydrogen in 2050 represents 12% of the total final energy demand”.[16] Of that global future need, ca 32% would be used by the power sector, with the remainder in ammonia and transportation. The future addressable market will clearly be material, but companies need to showcase the path to near term profitability, Bloom seems to be the closest company to reaching this positive margin.




Companies in the renewable energy segment are keen to enter into lucrative and fast-growing segments. For example, Iberdrola (IBE.MI, down -10.32% in June, down -4.94 % YTD) just announced its first utility scale clean energy storage project in Ireland.[17] However, despite the robust growth forecasts, certain equipment manufacturers are struggling to translate the long-term prospects into short term profitability.

That is the case for Nordex (NDX.F, -down 26% in June, down =41.51% YTD) and Vestas Wind Systems (VWS.CO, down -15.34% in June, down -25.05% YTD). Germany is going to be a key market for wind projects, as the country plans to double its onshore wind capacity by 2030, reaching 115 GW, a figure required to get their grid to 80% renewables by the end of the decade. That will require ca. 10 GW of annual onshore wind additions, 5-fold the ca 2 GW added in 2021. To do so the country will give renewable energy “overriding public interest” status. Last week in June, Nordex announced it is closing down a wind turbine blade manufacturing facility in Northern Germany.[18] Of the top 10 wind turbine manufacturers, six are Chinese, three are European (Vestas the largest player supplying ca. 10 GW, followed by Siemens Gamesa supplying ca. 9 GW and Nordex the smallest at ca. 2 GW, all in the index) and one is American (GE, not in the index).[19] In their efforts to accelerate the energy transition, European governments are also facing the question of how to support key local equipment manufacturers in the process, with a fresh history of how local solar panel manufacturers were not able to compete with price pressures from Chinese players.




Short term solutions to the energy crisis are energy efficiency and producing electricity (and storing it) at the point of consumption, i.e., in buildings. Insulation solutions, smart meters, smart thermostats, heat pumps, solar rooftops are key technologies represented in the graph below. Sunrun (RUN, down -10.57% in June, down -31.9% YTD), SunPower (SPWR, down -10.53% in June, down -24.25% YTD) and Sunnova Energy (NOVA, down -7.85% in June, down -33.99% YTD) had a good beginning of the month, when President Biden waved tariffs on solar products coming from Southeast Asia.[20] Heat pump makers Nibe (NIBE.ST, down -9.75% in June, down -43.84% YTD) and Trane Technologies (TT, down -5.93% in June, down -35.72% YTD) are poised to benefit from the RePower EU clear goal of 2 million heat pumps per year to be added to buildings in the region in the next 5 years (according to Ember almost 2 million heat pumps were installed in Europe in 2021), reaching a total of 30 million installations by 2030.[21]  The graph below indicates that current markets are discounting future growth despite the robust prospects of the many solutions.




Fluence, the JV between AES and Siemens focused on developing long duration energy storage (LDES) solutions, is doing a deep dive on the challenges that transmission system operators face in 2022. Solving intermittency is a key priority for the countries and regions committed to a 100% green grid; Germany and California in particular. Here are the first three articles not to be missed:

Intermittency & Congestion      Weakening Grid Stability        Reduced Visibility of Grid Assets

      Challenge 1                                 Challenge 2                                Challenge 3



Proactive New York spoke to Gaby about ESG 3.0, the challenging market and what is ahead for green growth. You can see the video here: 

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.



Climate Change ETF Performance (As of 30.06.22)








CLMA iClima Global Decarbonisation Enablers UCITS ETF (Acc)







CLMA iClima Global Decarbonisation Enablers Index








Smart Energy ETF Performance (As of 30.06.22)








iClima Distributed Renewable Energy UCITS ETF (Acc)







iClima Distributed Renewable Energy Index







Performance before inception is based on back tested data. 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. Source: Bloomberg / HANetf. Data as of 30.06.2022 Please note that all performance figures are showing net data.



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