Investors need to change the way they look at the energy sector, according to John Plassard, senior investment specialist at Mirabaud Group.
In a commentary note, Plassard laid out his thoughts on what is a complex sector for prospective investors to examine.
“Let’s be honest: it’s almost impossible to get your head around energy,” he said. “With shale gas extraction on the rise in the US, growth in nuclear power, more solar panels in China and so on, the energy situation is anything but straightforward.”
Plassard noted the latest energy report from the International Energy Agency (IEA), shows global energy demand has risen again, driven by a sharp increase in electricity consumption.
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The electrification of consumer habits, the digitalisation of the economy and extreme weather events accelerated the trend, he said. Emerging countries, particularly in Asia, have been the main drivers of this.
“Despite this intensification, the growth in CO2 emissions has remained limited, signalling the beginning of a decoupling between economic growth and carbon footprint,” Plassard added.
In terms of the implications for how to approach investing in the energy sector Plassard explained that investors now need to rethink their reading of the sector, as energy is no longer ‘a homogenous block’.
“All energy sources contributed to this growth, but not at the same rate,” he said. “Natural gas was the most dynamic fossil fuel, boosted by industrial and residential demand.
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“Oil, on the other hand, saw its share fall below 30% for the first time, marking a historic turning point. Coal has held up well thanks to heat waves, particularly in Asia, but remains under regulatory and climatic pressure.
“At the same time, renewable energies accounted for almost 40% of the increase in global supply. The gap in performance between sources is widening, rewriting the hierarchy of the global energy mix.”
Nuclear power has been underestimated, often forgotten, sometimes demonised but is now ‘back in the limelight,’ according to Plassard.
“In 2024, more than seven gigawatts of new capacity was connected, an increase of 33% over one year. Nuclear generation jumped by 100 terrawatt hours, one of the strongest gains in decades.
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“China and Russia are leading the way, with both countries accounting for all the new projects.
“Why this return? Because nuclear power offers something that few other technologies can guarantee: decarbonised, continuous, high-density energy,” he continued. “In a context of price volatility and the need for energy sovereignty, this combination is rare.
“For investors, the signal is strong: we now need to reconsider the equities linked to the nuclear cycle, from uranium to technology.”
Another key area for investors to target highlighted by Plassard is electric vehicles.
“Despite what you may hear here and there, electric vehicles are no longer a niche: they are establishing themselves as the new standard,” he said.
“In 2024, more than 17 million units were sold worldwide, representing 20% of total sales.
“This growth is leading to a direct increase in demand for electricity in the transport sector, with a growing impact on the networks.”
