Individual Stocks or Funds: Which is the Better Investment Strategy?

Lithium is currently the most commonly used metal for batteries because it enables a relatively high energy density. However, sodium batteries are increasingly becoming an attractive alternative: Sodium is available in unlimited quantities as a salt of the oceans (sodium chloride NaCl) and can be extracted without causing environmental damage. Sodium batteries are also characterised by a high level of safety, as they are less flammable. However, sodium batteries also have disadvantages due to their lower energy density. They are more suitable for stationary applications.

Resourceful Researchers in a Race

Market forecasts from Bloomberg and McKinsey predict that the battery market will grow several hundred billion times over. The brightest minds are working with huge R&D budgets to eliminate the disadvantages of sodium batteries – low voltage and corrosion of the cathode (service life). In fact, great successes have now been reported. The first cars with sodium batteries are already on the road in China. The industry leader BYD is investing more than USD 1 billion in a large production plant. The other industry leader, CATL, wants to reduce the cost per kilowatt hour to $57 with a new generation of sodium batteries. A car battery would then cost less than $5,000. Research is going in various directions, and experiments are also being carried out with other inexpensive metals (magnesium, aluminium, zinc). There are great expectations for solid-state batteries, for example, which boast greater energy density and improved safety. The first factories are already under construction and should be supplying safe, high-performance batteries as early as next year.

Significance for Carnot

Battery prices have been falling slightly for years. However, with the emergence of new materials and technologies, a significant price reduction is now imminent. Due to the high capital intensity and major technology risks, battery production remains unattractive for us as investors. Nevertheless, the significant reduction in battery prices is relevant for us, as it makes the combination of renewable energy and storage cheaper. This triggers further investments in the conversion of the energy supply, where our portfolio companies are involved – from engineering, technology and installation through to system control and optimisation (AFRY, Concentric, ABB, etc.).

Did You Know?

700,000 tonnes of cheese are stored in American caverns. That is more than three times Switzerland’s annual production.

This was the title of a discussion programme on SRF television. The answer depends very much on your point of view. The expansion of nuclear power slowed down after the Chernobyl disaster (1986) and practically came to a standstill after Fukushima (2011), with Asia (China, India) being the exception. Since Europe has renounced Russian gas and wants to take the reduction of CO2 emissions seriously, nuclear energy is enjoying more support in Europe again.

The biggest advocates of nuclear power come from the IT industry: for Jensen Huang, CEO of Nvidia, nuclear power is virtually the natural energy source for operating the power-hungry data centres and Microsoft has already concluded a long-term supply contract with the damaged Three Mile Island nuclear power plant.

Some Key Aspects

In addition to high reliability and climate neutrality, nuclear power’s apologists cite the greater safety and lower radioactive waste of the new reactor designs. In addition, nuclear power plants reduce dependence on problematic exporters of fossil fuels. Essentially, however, proponents and opponents have been putting forward the same arguments for decades. Public opinion remains divided and varies from country to country.

The technology is indeed developing. However, the first SMRs – Small Modular Reactors – are unlikely to go into operation before 2030. The economic viability of new construction projects remains a major challenge, as the new plants in the UK and Finland have shown. While state support for solar and wind projects is declining, this is not (yet?) the case for new nuclear power plants.

Significance for Carnot Capital

The future of nuclear technology remains vague due to high costs and safety concerns, which is why we are not directly involved. In addition, sustainability is controversial. Over the last 20 years, the production of nuclear power has remained more or less stable globally. Due to the high growth in renewable and fossil electricity production, the proportion has halved to around 10%. In terms of value, investments in renewable energies are currently around ten times higher. We are therefore looking for investment opportunities in the management of electricity grids, where requirements have risen sharply. Schneider Electric, ABB and BKW fall into this category.

Did You Know?

The first British coal-fired power station was started up by Thomas Edison in 1882, and the last one went out of operation at the end of September.