To celebrate the first anniversary of Downing Renewables and Infrastructure Trust (DORE) being listed on the London Stock Exchange, we spoke to Downing’s Head of Energy and Infrastructure, Tom Williams, about a successful first 12 months and what to expect in the next year.
1. What were DORE’s notable milestones over the year?
Tom Williams (TW): It has to start with the investments we have made and how they have performed. I look back now on our standing start in December last year and how we have not only delivered but also exceeded, our promises to investors – I am immensely proud of the team. We're pleased that DORE is now starting to make a difference and is contributing towards our journey to net zero, but we recognise that there is a long way to go!
If you look at the portfolio, hydropower is the standout investment. These were carved out of a large utility and had to be transitioned into our ownership and management throughout 2021. There is a huge amount of work involved when taking on full operational responsibility for the production facilities, dams and reservoirs. There is so much to consider in addition to the operations and maintenance, such as production planning, control and dispatch, and health and safety. We’ve been fortunate to be able to start with a clean slate and have tried to approach this with a different mindset; how can technology and the internet of things (IoT) increase safety, increase revenue optimisation and reduce costs? The results will start to be seen over the next few years as we implement these different ideas.
Last but not least was how we adapted and rose to the challenges of Covid-19. Working from home has gone very well from the perspective of our systems and processes but has taken a toll on everyone’s mental health. We have all had ups and downs, but it is to the team’s credit here at Downing that they have battled through and remained strong for clients and our wider network.
2. In your opinion, what notable steps have been made in the UK’s energy transition in 2021?
TW: There have been a couple of events this year that focused public thinking around energy consumption. COP26 has been widely covered and is a tremendous positive, but for me, the markets have added their own voice - the price of mandatory carbon increased very significantly, as did the price of gas.
These two factors, more than any others, have brought home to people in the UK where our energy comes from and how reliant we still are on fossil fuels from far-flung places. It is constantly in the news in one form or another, whether it is a lack of petrol at the pumps or a retail energy supplier going bust as a result of rising costs. I wonder if the direct intrusion of this issue into peoples’ lives might be the more significant factor for the UK’s energy transition in the future?
3. What are the key energy trends to look out for in 2022?
TW: I think that the impetus behind renewable energy will continue.
We haven’t yet solved the challenges of the increased penetration of renewables into the UK’s energy generation fleet and so I also expect storage and flexible generation to remain firmly in focus.
In the Nordics, it will be very interesting to see how the distribution network operators (DSOs) and transmission system operators (TSO) procure ancillary services. The system has so much in-built storage (through hydropower) that the strain on the grid has been felt less than in the UK, but it is rising.
4. What can we expect to see from DORE in the next 12 months?
TW: We’ve got ambitious growth plans and are looking forward to continuing to diversify the portfolio by technology and geography. There are plenty of near-term opportunities out there, so watch this space!
5. What wider trends do you think will make a big difference heading in the future for the energy transition?
TW: I wonder if this will be the year when the voluntary carbon markets return? We are following with interest the amendments to Article 6 made at COP26 and the recent announcements by the London Stock Exchange. Companies already have established offset programmes and some, like Microsoft, are even stating that their aim is not merely to be carbon neutral going forward, but carbon neutral going back to its establishment in the 1970s. However, this is not widespread and governmental and regulatory encouragement in this area would be welcomed.
I also think hydrogen could make a huge difference. I’ll be watching carefully to see how it emerges and whether projects will get off the ground. It feels like a natural place for the oil majors to move into with their existing infrastructure.
If this is the case, a hydrogen transition could be a significant contribution to our campaign against climate change.
Please note: Capital at risk. Returns not guaranteed. Opinions expressed represent the views of the fund manager at the time of publication, are subject to change, and should not be interpreted as investment advice. Capital at risk. Returns not guaranteed.