Decarbonisation and Smart Energy Monthly Report | September

26 September 2022


Powell reaffirms hawkishness: Better than expected economic news at the beginning of summer, somewhat strong earnings and an expectation of moderate recession prompted a broad summer rally as we saw equity markets rebound in July (S&P500 was up 9.3% in the month). Green companies gained additional momentum as Senator Manchin yielded to negotiations, including Bill Gates’ lobbying, and a clean energy bill with the suitable name “Inflation Reduction Act” (IRA) was signed into law on August 16th.[1] What some bearish analysts saw as “irrational exuberance” came to an end on August 26th when the FED’s Chairman Jerome Powell warned at the annual Jackson Hole policy speech event that “some pain” is ahead. He was referring to higher interest rates bringing inflation down but causing slower economic growth and an increase in unemployment. [2]

Therefore, despite the solid performance in the first two weeks of August, the iClima Decarbonisation Enablers Index was down -3.66% in the month and is down -19.61% YTD, while the iClima Distributed Renewable Index was down -0.51% in August and is down -17.26% YTD. [3]

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.

Russia stops gas flow to Europe catalysing fears of rationing and more inflation in the winter months aheadWhat started as a temporary halt to the Nord Stream 1 NatGas pipeline at the end of August now looks like a permanent stop.[4] Spare fossil fuel capacity is short everywhere; OPEC’s is the lowest on record, so the group will be cautious to use it. LNG and coal production are at a maximum. Russia is exploiting Europe’s dependence by weaponizing fossil fuels, blowing on the fire of inflation. Price caps are only a palliative to the problem. To solve this supply crisis, we need to lower physical demand for fossil fuel. This means accelerating the short-term solutions – energy efficiency and solar rooftops – as well as longer term investments in the green economy. The IRA bill (more on that below) in the US and the legislation in Germany and across the EU is providing the impetus much needed to solve the problem.   



With US mid-term elections approaching, many were concerned that the Biden administration would not be able to get Senator Manchin over the line. It turned out that in August the US passed the most significant climate change mitigation legislation ever, the bill’s name implying that the clean energy measures are to have a deflationary effect on the economy.[5] As the US was behind the legislative efforts of the EU, it was able to leverage successful policies in European countries. Research shows that "not all subsidies are equal", as consumers have a strong preference for point-of-sale discount as opposed to fiscal stimulus via annual tax return filings. The Bill earmarks a total of $369 billion in investments into energy security and climate change, as follows: $161 billion as fiscal stimulus for clean electricity; $100 billion to make clean technology and solutions more affordable; $75 billion for environmental conservation and ca. $33 billion to support US based clean tech supply chain development.[7] The bill could put the US on track to cut CO2e emissions by 40% by 2030. Some of the key incentives are: [8]

For clean vehicles: Lower- or middle-income individuals can get up to a $4,000 consumer tax credit to buy used clean vehicles, and up to a $7,500 tax credit to buy new clean vehicles in 2023, with a direct upfront discount starting in 2024;

For residential clean energy: Credit applies to American homeowners and renters for the next 10 years, with a 30% tax credit towards rooftop solar, geothermal heating and battery storage;

For energy efficiency home improvements: Up to $2,000 per year tax credit for heat pump dual systems (heating and cooling), up to $2,000 per year tax credit for heat pump water heater; and up to $1,200 for improvements in insulation, air sealing and ventilation;

For High Efficiency Electric Home Rebate (HEEHRA): Upfront discount for heat pumps, electric stoves, heat pump clothes dryers, electric panels, basic weatherization and electric wiring;

For Sustainable Aviation Fuel (SAF): R&D support of $300 million and $1.5 per gallon of tax credits for sustainable fuels with 50% less GHG emissions. [9]

The IRA will transform the US buildings sector, as retrofits and new developments will converge energy efficiency, mobile and stationary clean energy storage, and vehicle electrification. It will also change green financing processes, as previous legislation had the Investment Tax Credit (ITC) and Production Tax Credit (PTC) being used by the asset owners only, which gave rise to complex “tax equity” investment structures. The IRA introduces a credit transfer provision so that a taxpayer that invests into one of the solutions can transfer their tax credits to an unrelated person for cash.[10] It is early days, but the new language is likely to accelerate and create flexibility in project financing. In terms of consumers, the IRA puts individuals at centre stage in the adoption of the solutions and the immediate savings as the main driver prompting the transition to lower emission alternatives. We will be monitoring the impact of the IRA in accelerating adoption on two key consumer led indicators, namely:

US residential solar rooftop investments: As of July 2022, California had 1.5 million rooftops installed (12,944 MW of distributed solar generation, a 10-fold increase over the 1,232 MW of capacity back in 2012).[11] According to the US Census Bureau there are 13.2 million households in CA, so the current penetration in the market with the highest adoption of local solar is ca 11%.[12] Shortly after the IRA was signed, BloombergNEF predicted that US households will install a record amount of solar amounting to about 5.6 GW by year end, a figure three times higher than the capacity being added by commercial users.[13] California, Texas, Florida and the Midwest will lead in terms of adoption.

EV adoption, where the US is far behind: According to the IEA, in 2021 the ten largest markets for EVs as a percentage of overall car sales were Norway (at 86%), Iceland (at 72%), Sweden (at 43%), Denmark (at 35%), Finland (at 31%), Netherlands (at 30%), Germany (at 26%), Switzerland (at 22%), Portugal (at 20%) and the UK (at 19%).[14] China was 13th with 16% of all auto sales while the US was 19th at 5% of all sales. China is expected to lead on the manufacturing side, producing 8 million units in 2028. The adoption of EVs in the US is accelerating, and again California is leading the way. Shortly after the IRA was put in place, California banned the sale of new gasoline cars after 2035, requiring 35% of all new vehicles sold by 2026 to be zero emissions (EV or H2 power), rising to 68% by 2030. [15]



Earlier in the year, the US Securities and Exchange Commission put forward three key proposals: The Names Rule proposal, the Climate Disclosure proposal, and the ESG Strategy proposal. The motivation is to minimize greenwashing and, through higher disclosures, allow investors to better quantify (and price) climate change risks and opportunities. Under the proposed rules of the SEC, companies listed in a US exchange would need to disclose Scope 1, 2 and 3 emissions. In the next months we will see if Congress will give the agency statutory authority for disclosures or if the SCOTUS will, as it did with the EPA in June, rule climate disclosures to be out of scope of the SEC. A win for the SEC will be another material win for the Biden administration and for the mitigation of climate change. [16]

In 2022 the strategy of investing in “brown value” is paying off, but the same high prices have started to cause demand destruction, thus accelerating the energy transition over the long term. This peculiar coexistence of “green growth” and “brown value” is being misinterpreted by many analysts as the revenge of the old economy and value investors have returned to fossil fuel names. The acceleration of the energy transition triggers a process of profound, structural changes that will undoubtedly create many winners and many losers. There are also challenges in the clean energy space, but a deeper look at how innovations are likely to unfold gives us greater insight into the risks and opportunities for green investments

Solar panels and batteries are not fuels, they are technologies. Producers of both equipment have become more efficient as scale increases, which has been consistently driving down prices. Looking at how the new clean solutions are likely to develop is paramount to understanding where the risks and opportunities in the path towards a clean grid are. The best framework we have seen that elaborates on this potential evolution was put together by Bill Nussey, solar energy enthusiast, a venture capitalist, successful entrepreneur, an experienced engineer that is the author of “Freeing Energy”, a book published in 2021 predicting the rise and fast adoption of what he beautifully calls “local solar”.

In explaining the profound and transformative potential of solar energy, Bill elaborates on the evolution of technologies and supply chains, which he refers to as “the five orders of cleantech innovation”. They are Components (first order), Integrations (second order), Services (third order), Platforms (fourth order) and Disruptions (fifth and last order).

• 1st order: Where we see the foundation of the entire industry. In clean energy, the producers of solar cells, solar panels, batteries and inverters fall into this category. Manufacturing these key components is capital intensive, takes a lot of time to achieve scale and the products are somewhat commoditized, so price competitiveness is a must. Canadian Solar (CSIQ, up 22.45% in August, up 44.36% YTD), Enphase Energy (ENPH, up 0.8% in August, up 56.6% YTD) and Jinko Solar (JKS, down -8.22% in August, up 32.44% YTD) are examples of successful first order companies.

• 2nd order: Here innovation is characterized by the integration of first order components into a new product or market. Bill Nussey sees solar installers as the quintessential example of Integration in the clean energy space. Sunrun (RUN, up 1.04% in August, down -3.7% YTD) and Sunpower (SPWR, up 17.82% in August, up 15.0% YTD) are two examples of second order companies. Sunrun is the market leader in installation for residential solar rooftops in the USA (the company is embracing 3rd and 4th order businesses as we will see below, but Sunrun is still fundamentally an installation company). On the clean energy storage side, second order solutions integrate the different components into a single system. Flow batteries, thermal storage and mechanical storage providers are other examples of 2nd order companies. Energy Vault (NRGV, not in the decarbonization index as it is a pre revenue company, up 23.82% in August, down -44.34% YTD) uses kinetic energy as a low-cost utility scale alternative to lithium-ion batteries.

• 3rd order: As solar rooftops are a powerful short-term solution to the energy crisis, allowing users to save money from day one (in particular with the benefits that the Inflation Reduction Act is promoting in the US market), “solar everywhere” is materializing as a milestone in the energy transition. This will combine with long duration energy storage (“LDES”) for a much bigger transformation. So higher up in the value chain comes the 3rd order of innovation, where companies turn second order assets like solar panels and batteries into a service. These companies provide a pay as you go, or subscription model service that is an alternative to the traditional model based on an upfront installation fee. Microgrid services or energy storage solutions fit into this category. Two great examples are Stem (STEM, up 38.75% in August, down -17.13% YTD) and Fluence (FLNC, up 45.2% in August, down -43.9% YTD); neither manufactures the equipment, instead they deliver, install, and operate clean energy storage as a service. Another service provider, solar installation is targeting a 3rd order business. Sunnova (NOVA, down -3.07% in August, down -9.67% YTD) has applied for a microgrid license for a new residential real estate development in California with up to 2,000 units targeting full supply of electricity to the homeowners independently from the grid. [22]

• 4th order: Characterized by new innovative platforms that increase the value of services and assets in a commission-based revenue model. Nussey points to Uber and Airbnb as quintessential examples of Platform businesses that gave an opportunity to asset owners of cars and properties to optimize and monetize their value. That is what we are observing in Vehicle to Grid (“V2G”) and Virtual Power Plant (“VPP”) solutions that have optimization software at the heart of their Platforms. A great example of a company in this space is Nuvve (NVVE, no longer in the decarbonization index as its market cap dropped below the minimum required level, down -18.23% in August, down -78.45% YTD), the only pure V2G listed company that enables owners of EV fleets to use the mobile batteries inside the electric cars to provide frequency regulation and peak shaving to the benefit of the grid. Sunrun has been investing into the more potentially lucrative 4th order innovation and already operates a VPP in California. Another exciting name is Voltus, a company that was supposed to go public via a SPAC merger and could become the only listed pure player in the demand response distributed energy space.

• Lastly, the 5th order: Where we see potentially the most profound innovation, that of the Disruptors. Nussey sees green hydrogen as a transformative industry that can decarbonize a broad range of other industries, from cement to fertilizers and steel producers to hard to abate transportation in the maritime space to, of course, LDES solutions. While no pure green H2 players have emerged yet, current proxies for the disruptive potential of clean hydrogen are originally 1st order component manufacturers of the two key technologies (also moving into more elaborate 3rd order Services): fuel cells and electrolysers. Bloom Energy (BE, up 25.61% in August, up 15.87% YTD), the California based manufacturer of solid oxide fuel cells for behind the meter electricity production, and PlugPower (PLUG, up 31.4% in August, down -0.67% YTD), focusing on proton exchange membrane (“PEM”) fuel cells for transportation applications, are both examples of companies enabling the creation of a hydrogen economy.

Green investors should think thematically to capture the unprecedented value creation that the energy transition represents. The iClima Global Decarbonization Enablers Index was designed to represent a comprehensive set of clean energy solutions across the five degrees of innovation described above, allowing investors to gain exposure to the companies solving the bottlenecks at the base of the supply chain, while benefiting from the overall revenue growth that all providers of the key solutions will benefit from, without being overexposed to the riskier (but potentially very rewarding) more disruptive 4th and 5th order strategies. iClima Global Decarbonization Enablers Index represents key opportunities across the five orders of innovation, from batteries to solar panels, to aggregators of distributed energy assets like V2G and VPP. Our approach provides enough diversification, as it is as yet premature to call winners and be overexposed to a few companies or to hold too concentrated a portfolio.

Canadian Solar, Jinko Solar, First Solar, and Enphase’s strong share performances YTD (more on those companies below) showcase how markets in 2022 have favoured the most “obvious” names in the 1st order of innovation. Makers of the key technologies like microinverters, batteries, solar panels and fuel cells (Bloom and PlugPower, also more below) are up in the year, while the longer-term stories (e.g., Fluence and Stem) in the 3rd and 4th order have been suffering a severe sell off until the IRA was passed into law. At that point investors realized that solid names like Fluence and Stem were trading at a steep discount. Despite the daunting macroeconomic conditions that persistent inflation and unavoidable recessions will bring, the case for thematic green growth is stronger than ever.



The EU has been leading the legislation on energy transition acceleration measures, and while the US finally delivered on Biden’s campaign promises on climate related support. Additional good news from Asia showcases the global acceleration towards green solutions. Also in August, China unveiled 19 new measures with a huge focus on infrastructure growth.[17]  Covid lockdowns and a property downturn triggered by the Evergrande default earlier in the year may be part of the impetuous to revive the Chinese economy, with a new deal infrastructure package that will generate economic growth and employment. Having suffered a persistent drought, the Chinese infrastructure plan elevates water infrastructure as a climate change adaptation strategy to deal with “the worsening of both floods and droughts”.[18]  Projects that move water around China represent a third of the water budget, while ca. 30,000 water conservation projects are also seen as a way to employ over one million workers.

Bloomberg estimates that ca. $1 trillion of Chinese government funds will be available to support the several infrastructure projects, with the total capex reaching three times that amount when considering bank lending and corporate funding on top of the $1 trillion.[19] North Chinese deserts are to host an unprecedented amount of utility scale solar and wind, with a first phase of 100 GW of both wind and solar being added by 2023 and a second phase with over 450 GW starting in 2022. Ultra-high voltage transmission lines are to be built to connect the new green electricity to demand centres in the more populated Eastern region. High speed rail has already been elevated in China and the country currently has over 40,000 km of high-speed rail that Bloomberg estimates to be more than twice that of all other countries combined. Yet, this plan considers an additional 30,000 km of high-speed rail to be in operation by 2035. [20]

The new infrastructure plan in China is evidence of further acceleration of the energy transition in the second largest global economy, but China had already been focusing on the relevant solutions. Another indication of that comes from the inauguration, also in August, of what is now the largest building integrated PV (BIPV).[21] A 120 MW multi-roof solar project built across 11 different locations, covering 665,000 m2 of rooftop space and capable of supplying 100% of the industrial park’s electricity needs.


August marked the end of the reporting of 2Q22 earnings. The vast majority of the S&P500 companies had already reported results, with 75% of them beating earnings estimates and 70% beating sales estimates. Real estate, materials, industrials and energy were the segments exceeding expectations, with fossil fuel names benefiting from soaring oil and gas prices.[23] Financial results are not yet showing the impact of global economic contraction, inflation and the supply chain disruptions that are feared to persist in the second half of the year and beyond. Here we highlight the companies in our universe that are at different “orders of innovation”, all reporting solid revenue growth.

Fluence Energy, Inc. (FLNC, up 45.20% in August, down -43.90% YTD): The energy storage hardware and software provider saw its share price surge this month following news that the company will push its SaaS Business, where cloud-based software products are used to optimize solar, wind, and energy storage for 16 GW of assets.[24] The company also reported results for the quarter that ended in June. Revenue was in line with expectations despite falling -14% YoY to $239 million due to the recent COVID-19 related lockdowns in China.[25] In the last 9 months the energy storage product order intake reached 1,493 MW, already above the order intake of 1,311 MW observed in the previous fiscal year. Adjusted EBITDA for the quarter was negative $48 million, compared to negative $35 million for the same quarter last year, while total cash position went up by $39 million, reaching ca. $762 million. Nonetheless, the company warned that “we continue to see a tight battery and inverter market in 2023”.

Stem, Inc. (STEM, up 38.75% in August, down -17.13% YTD): Much of Stem’s rally in August took place at the beginning of the month, following robust 2Q22 earnings when revenue of $67 million, up $19 million (+246%) YoY. This beat the top end of their guidance by 5% as both hardware revenue from Front-of-the-Meter (FTM) and Behind-the-Meter (BTM) partnership agreements drove a quarterly increase.[26] Net losses contracted, from $100.2m in 2Q21 to $32.0m in 2Q22. Their 12-month pipeline reached $5.6 billion, up from $5.2 billion (+8%) at the end of 1Q22, while the contracted backlog reached $727 million, up from $250 million (+191%) at the end of 2Q21. The company also had a record number of contracted storage assets under management of 2.1 GWh, up from 1.8 GWh (+17%) at the end of 1Q22. Stem expressed their delight at the Inflation Reduction Act being signed into law and CEO John Carrington said “for customers deploying energy storage and solar, the most significant parts of the bill are tax credits for clean electricity investment and production.[27] We anticipate that these incentives will increase investment certainty and make adoption more affordable in existing and new energy markets.” [28]

Plug Power Inc. (PLUG, up 31.40% in August, down -0.67% YTD): The fuel cell maker began the month by announcing an agreement with New Fortress Energy for a 120MW green hydrogen plant in Texas – one of the largest in North America.[29] At the back end of the month, Plug also signed a H2 supply deal with Amazon, to provide 10,950 tons per year of liquid green H2 starting in 2025.[30] Since 2016 Plug has helped Amazon to deploy over 15,000 fuel cells for forklifts across 70 distribution centres. On August 9th Plug Power released somewhat poor results. While sales rose 21% in 2Q22 to $151.3 million they were slightly below analyst expectations of $169.1 million, but management reaffirmed revenue guidance for the year at $900-$925 million.[31] The deal with Amazon is a milestone for the company and is expected to help Plug Power toward its 2025 goal of reaching $3 billion in annual revenue.[32] The enactment of the Inflation Reduction Act was celebrated by management as the $3/Kg Clean Hydrogen Production Tax Credit (PTC) will bring Plug’s profitability forward to 2024 instead of 2025. [33]

First Solar, Inc. (FSLR, up 28.62% in August, up 46.34% YTD): The Arizona based solar manufacturer posted strong results toward the end of July which sparked a continuing rally into August, further fuelled by the IRA.[34] Net sales for 2Q22 were $621 million, up 69.2% YoY. CEO of First Solar, Mark Widmar said “We now have a record backlog of over 44 GWs, extending the horizon for future expected deliveries to 2026. The 10.4 GWs of new bookings since our prior earnings call in April brings our total year-to-date bookings to 27.1 GWs.” Another beneficiary of the IRA policy of promoting local manufacturing, First Solar also announced they will be investing up to $1.2billion in scaling production of domestic ‘responsible solar’ by 4.4GW. [35]

Bloom Energy Corporation (BE, up 25.61% in August, up 15.87% YTD): The solid oxide fuel cell maker rallied off the back of Congress passing the Inflation Reduction Act.[36] The company also announced record 2Q22 revenue of $243.2 million, translating into a YoY sales growth of 6.46% and a quarter-over-quarter growth of 20.99%.[37] Bloom also reported their deployment of the first fuel cells in the European Union with Ferrari and announced the first USA electrolyser order with LSB Industries. The company maintained their 2022 financial outlook despite tough economic conditions. [38]

XPeng Inc. (XPEV, down -24.19% in August, down -63.20% YTD): The Chinese EV maker reported a wider-than-expected loss after Shanghai’s lockdown and supply chain snarls troubled their last quarter.[39] The net loss widened to 2.7 billion yuan ($394 million) in the quarter ended June 30 compared to a 1.19 billion yuan shortfall a year earlier. While revenue for 2Q22 almost doubled to 7.44 billion yuan, beating the 7.29 billion yuan forecast, the electric carmaker’s expected deliveries for the third quarter missed average analyst estimates. Xpeng saw car shipments of between 29,000 to 31,000 units in the three months through September versus market expectations of approximately 45,865. [40]

Sunrun Inc. (RUN, up 1.04% in August, down -3.70% YTD): Latest Q2 earnings showed a 21% YoY growth in the number of customers, 33% YoY growth in new installations and a 28% YoY increase in customer orders.[41] Total revenue in the 1st half grew 46.80% YoY. CEO Mary Powell summarized the tailwinds: “The confluence of a growing understanding about the virtues of powering your home with solar energy and storage, compounded by rapid utility rate inflation across the country, is driving record levels of demand, following on from the price actions we took in late March and early April. Rapidly escalating utility rates sustained a very strong customer value proposition”. [42]

Canadian Solar Inc. (CSIQ, up 22.45% in August, up 44.36% YTD): In mid-August the company reported strong 2Q22 results.[43] Solar module shipments reached 5.06 GW, at the high end of guidance of 4.9 to 5.1 GW, which translated into a 62% increase in revenue YoY to $2.31 billion, above the high end of the $2.2 billion to $2.3 billion guidance range. More importantly, gross margins were also above expectations of 14.5% to 15.5%, at 16%. The company’s solar project pipeline reached 26 GWp in June, while its storage pipeline grew to 31 GWh. The company ended 2Q22 with a total cash position of $1.9 billion, which will be used to support the acceleration of their upstream capacity expansion. The company’s solar manufacturing business operates under the CSI Solar subsidiary, which is being prepared to be carved out and listed in an IPO. [44]

Jinko Solar Holding Co., Ltd. (JKS, down -8.22% in August, up 32.44% YTD): A strong earnings performance wasn’t enough to offset investor worry over Chinese government policy and worsening economic conditions in the region. Quarterly shipments were 10,532 MW (10,183 MW for solar modules, and 349 MW for cells and wafers), up 25.5% QoQ, and up 102.4% YoY.[45] Total revenues were RMB18.84 billion (US$2.81 billion), up 27.6% sequentially and up 137.6% YoY. The sequential and year-over-year increases were mainly attributable to an increase in the shipment of solar modules. Gross profit was RMB2.77 billion (US$413.8 million), up 24.5% sequentially and up 103.9% YoY. The company reported that despite polysilicon prices rising, they actively managed to control internal costs through technical advancement and process improvement, partially offsetting the impact of higher upstream costs. Gross margin was 14.7%, compared with 15.1% in 1Q22 and 17.1% in 2Q21. [46]

Enphase Energy, Inc. (ENPH, up 0.80% in August, up 56.58% YTD): The micro-inverter producer reported solid earnings, with total revenue increasing 20.15% QoQ and 67.75% YoY.[47] Microinverter shipments were up 18% QoQ, while battery shipments were up 10% QoQ. Non-GAAP gross margin reached 42.2%, up from 41.0% in 1Q122, driven by a favourable product mix of higher margin goods. Revenue in Europe increased 69% QoQ led by strong growth in the Netherlands and Germany. In the earnings call the CEO said “Homeowners want self-consumption as the region not only faces rising energy prices but also a growing demand for home electrification driven by EVs and natural gas shortages.” [48]

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. Source of all data: Bloomberg / iClima Earth.


Climate Change ETF Performance (As of 31.08.22)








CLMA iClima Global Decarbonisation Enablers UCITS ETF (Acc)







CLMA iClima Global Decarbonisation Enablers Index








Smart Energy ETF Performance (As of 31.08.22)








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 31.08.2022 Please note that all performance figures are showing net data.



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