Sun, Sun, Sun here we come...

The date was 27 August, 1956. The UK was in the midst of the Suez Canal crisis and rationing petrol. Black and white TVs were about to enter mass production, and folk tuning in for the inaugural Eurovision Song Contest would be disappointed, not for the last time, at the British entry. As a sign of the post-war decline, the people of the UK had an ever-decreasing number of reasons to be proud of their lot, but, today; on this day, they could at least point to the nation’s pole position in the global energy race. As Calder Hall, sited at what is now the Sellafield plant, plugged itself into the grid, the nuclear age had begun with the UK at its forefront.

The initial signs were encouraging. Not only was the plant capable of producing weapons grade uranium (its original purpose), but the 240MWe of power on board also promised cheap energy for the masses.

As with all new technologies, the early hype was largely overblown. With claims of progressing from nuclear fission to nuclear fusion abounding, it wasn’t too long before the Windscale fire of 1957 dulled the shine of the nuclear industry, despite claims from physicists that free fuel for all could be just around the corner.

Even today, those claims persist. As nuclear scientists devote billions of dollars in an attempt to fuse hydrogen together and recreate the conditions of the sun, the truth is, fusion-based power is already upon us. And growing rapidly.

Located roughly 93 million miles away and regular as clockwork, we have access to our very own fusion reactor. Providing us with all the energy we need, the sun has the power to generate all of the electricity we could ever wish for, thanks to our understanding of photovoltaics. But – and there’s always a but – solar power isn’t terribly efficient and the sun doesn’t always shine when you want it to.

Step forward science. Thanks to improving technologies, solar panels are becoming not only cheaper, but also much more efficient. Combined with advances in material science, the problem of electricity storage is also declining, meaning, not only can more sunlight be captured and converted, but that we can now begin to distribute and use the energy at a time and place of our choosing.

Right now, it is early days. Just 2 percent of the world’s electricity is generated via solar power, but it’s a figure that is growing rapidly and one that is predicted (by visionaries such as Elon Musk, no less) to reach as much as 27 percent by 2050. Growth at that pace and in an industry with that scale points to an exciting time for investors ahead.

So, how to play the solar theme? Panel manufacturers, installers, inverters (to change DC to AC) and cabling companies will all no doubt have a role to play, but the real enabling technology that will unlock not only solar, but other forms of carbon-free power such as wind and tide, is that of battery technology – both large scale to support industrial-size solar arrays and small scale to support localised home power production. As the motor industry transitions away from petrol to electric vehicles, it is here where some of the real advances in battery technologies are being made. When you change your perception of the automobile from that of a mechanical horse to one of a drivable battery, maybe the auto company valuations have a little more vroom in them yet?

Managing Director, AJ Bell Investments

Kevin began his career in the financial services industry as an Investment Analyst, eventually progressing to become Chief Investment Officer at a major private bank. He then took on the position of Group Head of Research & Strategy for a Luxembourg-based private banking group, before moving into a number of consultant roles for various investment management and banking businesses. In October 2017 he joined AJ Bell Investments as Managing Director and CIO.

Top