Norwich Union highlights investors' options in renewable energy sector

Article date: 30 October 2006

Higher oil and gas prices, fears aboutenergy security and political initiatives to reduce carbon dioxideemissions have boosted the renewable energy sector. The team thatmanages Norwich Union’s Sustainable Future funds looks at thedifferent ways of generating renewable energy and assesses the prosand cons of each sector.

Biofuels are fuels made from animal orvegetable matter. They can be blended with petrol or diesel andproduce less carbon dioxide.

Pros: Governments in US, Europe, UK, Canada, Australia,India and Thailand are encouraging use of biofuels to reduce caremissions and dependency on imported oil. High oil prices makebiofuel prices attractive.

Cons: Not all cars can run on biofuels; distribution anddemand are limited. Demand for biofuels is raising price offeedstocks and ethanol. There are also issues about sustainableland use such as clearing rainforests to grow biofuel crops.

Companies include: Abengoa, Novozymes, Andritz, InfinityBio-energy, Cosam.

Pros: Onshore wind is now competitive withgas-generated electricity. Fears about security of supply, reducedCO2 emissions and low input costs (the wind is free)have driven the sector, which grew 45% in 2005 with 31% pa growthsince 2000.

Cons: Development has been hampered by a shortage ofturbines and difficulties with planning applications. Wind powercan also be erratic and only 30% productive.

Companies include: Vestas, Clipper Wind, Suzlon,Gamesa

Pros: Low input costs (ie sunshine isfree), fewer issues with planning regulations, and cost-effectivein remote areas. Peak power generation coincides with peak powerdemand.

Cons: The technology requires subsidy, and there areshortages of poly silicon, which is used to makesemi-conductors.

Companies include: Solarworld, Q-Cells, Conergy, MEPC.

Fuel cells*
These convert hydrogen, natural gas oralcohol into electricity and heat.

Pros: Fuel cells have advantages over conventional powergeneration and are efficient at converting fuel intoenergy. US$3.7 billion has been allocated in theUS to fuel cell research over the next 10 years and US demand isestimated to reach US$1.1 billion by 2008.

Cons: Cells are still expensive and hydrogen is not readilyavailable as a fuel. Technology still being developed andmanagement quality is varied. Few companies make money from fuelcells and it is difficult for investors to appraise thetechnology.

Wave power
Pros: Britain has a wide choice ofpossible sites and wave is arguably more reliable than solar andwind power.

Cons: Marine technologies are not yet commercially availableon a large scale and will be expensive to build. Few of thetechnologies have been fully commercialised and are still beingdeveloped.

Companies include: Mostly private – Ocean PowerDelivery, Ocean Power Technologies

Peter Michaelis, manager of the Norwich Union UK Ethical fund andNorwich Union Sustainable Future UK Growth fund, said: “Webelieve the renewable energy market will grow faster than themarket in general over the next 20 years as governments try toincrease security of supply and reduce the environmental impacts ofpower generation.

“Energy demand is predicted to double by 2030, the costs offinding oil have risen dramatically and oil companies are having tosource supplies from unstable parts of the world.

“Investors should remember that renewable stocks are highlyvolatile and should be part of a diversified portfolio. At timesall the good news is priced into the market and stocks can trade atinflated valuations.”

Norwich Union’s Sustainable Future funds are managed byMorley Fund Management.


Press office contacts:
David Gwyer 01904 452828 Outof hours 07800 699508

Notes to editors:

* About biofuels
Biofuels are fuels made fromanimal or vegetable matter and produce less carbon dioxide thanpetrol or diesel. There are two types:


  • Produced from vegetable oils (oilseed rape/soybean) and/oranimal fats. It contains no petroleum, but can be blended withpetroleum diesel to create a biodiesel blend
  • It can be used in compression-ignition (diesel) engines withlittle or no modifications, and is biodegradable, non toxic, andessentially free of sulphur.


  • Produced from fermenting starch or sugar (corn, sugarbeet/cane)
  • Hydrous ethanol (95% by volume) contains some water – itcan be used directly as a gasoline substitute in cars withmodified engines.

Anhydrous (or dehydrated) ethanol is free of water and at least99% pure. This ethanol can be blended with conventional fuel inproportions of between 5% and 85% (E85). As a 5% additive it can beused in modern engines without modification. Higher blends requiremodified engines as run on so-called flexible fuel vehicles.

*About fuel cells
Fuel cells store converting fuel(hydrogen, natural gas or alcohols) into electricity and heat. Newtechnology is moving fuel cells closer to commercialisation. Sixtypes of fuel cell are technically available. Fuel cells have somemajor advantages over conventional power generation:

  • They produce low emissions compared to conventional powergeneration.
  • They could form an important component of distributed powerand reduce losses we experience from producing power centrally andsending it down transmission lines (where power is lost).
  • The high power to weight ratio lends itself well to providinglong life batteries for mobile devices.

About Norwich Union’s sociallyresponsible investment funds
Norwich Union has sevensocially responsible investment funds. The investment managementteam is based at Morley Fund Management and is one of the largestand most experienced in the UK. The team is lead by Dr PeterMichaelis.

About Norwich Union
Norwich Union is theUK’s largest insurer. It is a leading provider of life,pensions and investment products and one of the largest financialadviser (FA) providers. FAs provide over 70% of the company'slong-term savings business in the UK.

Norwich Union is the UK’s largest general insurer with amarket share of around 14%, with a focus on insurance forindividuals and small businesses.

Norwich Union’s news releases and a selection of images areavailable from Aviva's internet press centre

About Morley Fund Management
Morley Fund ManagementLimited is the UK-based asset management business of Aviva plc.Firms within the Morley group of companies manage £156 billion fromoffices around the world as at 28 February 2006.

Morley manages both institutional and retail funds under the Morleybrand. It also acts as investment manager for a range of retailinvestment funds, marketed in the UK under the Norwich Union brand,and international funds marketed under the Aviva Funds brand.

Further information about Morley Fund Management can be found

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