Climate Equity Selection and Climate Opportunity

HSBC released a recent report on their Climate Equity Opportunity list (pdf), or short ‘CEO’-list. The list comprises 88 companies that derive 20% plus from their low carbon energy, energy efficiency and storage, or water and waste.

HSBC sees the fastest growth for Renewable Energy in Emerging Markets and proposes that Energy Efficiency makes up the largest opportunity, about 53%. Overall, HSBC estimates that the total market size could be around $2.2trn. Sizing the Climate Opportunity accompanies HSBC’s Climate Equity Opportunity research piece.

HSBC’s report ‘includes five key segments: transport efficiency (USD677bn, CAGR 18%), building efficiency (USD245bn, CAGR 10%), industrial efficiency (USD183bn, CAGR 6%), energy storage (including fuel cells) (USD66bn, CAGR 15%) and smart grid (USD23bn, CAGR 8%)’.

However one sector stands out. HSBC suggests that the electric vehicle market will grow more than 20x by 2020 to reach USD473bn. This based on the assumption that the grow will be back-loaded, i.e. the growth will be faster in the second half of the decade as input prices fall and the industry starts to see scale. Importantly, the report estimates that battery costs will come down from about USD1000/kWh to about USD350/kWh. Underlying the assumptions are global electric vehicles (EV) sales of 8.65m units and sales of 9.23m plug-in and hybrid electric vehicles (PHEV). The average prices for PHEV gasoline and diesel vehicles in 2020 will be 5-10% lower than average EV prices (USD27,500).

Source: HSBC, September 2010

Saft Groupe makes an interesting appearance in the HSBC report. According to the analysis, 75% of Saft’s sales comes from markets where it ranks sector leader. More importantly, sales are diversified across other industries including the military. We mentioned Saft Groupe back in February 2010 when we advocated that the automotive industry will change forever. But not without an improvement in the Energy Storage sector. We connected our argument to the Lithium-Ion market. Overall, we continue to rank Saft Groupe as a very interesting play on the interconnection between EVs and Energy Storage. However, HSBC prefers Energy Efficiency over Energy Storage. We cannot agree more, in the near-term anyway.