19 Jan 2020

The surprising tech at the heart of clean energy

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FOR QUALIFIED INVESTORS ONLY– This document is reserved and must be given in Switzerland exclusively to Qualified Investors as defined by the Swiss Collective Investment Scheme Act of 23 June 2006 (as amended from time to time, CISA).

The world’s future is getting cleaner and greener. The era of fossil fuels and ‘gas-guzzling’ is coming to an end, and while news headlines focus on wind turbines, solar energy and tidal power, a much smaller but important innovation is already dramatically shaping the future of energy efficiency.

The semiconductor.

A new era in energy efficiency

Semiconductors are components of an electronic circuit, and the excitement around them is due to their potential to improve the energy efficiency of almost every kind of device.

LED lighting is a simple example: this ubiquitous technology is possible because of semiconductor technology. More importantly from an energy-efficiency standpoint, semiconductors are found in the integrated circuits which manage the power in everything from car motors, to air conditioning units, to batteries and mobile phones. Wherever technological breakthroughs are improving energy efficiency, semiconductors are found.

Already, one study from the American Council for Energy-Efficient Economy demonstrate that car miles per gallon had improved 40% over a 30 year period; lighting lumens per watt – a measure of luminous efficacy – were up by 339%; and computer system instructions per second per watt had improved 2,857,000%.1 All due to semiconductor-led efficiencies. The Semiconductor Industry Association considers the potential energy savings from further advances to be ‘limitless’.

Investors and governments are growing increasingly interested in clean energy, meaning there are strong financial motivators to improve the technology further. Many governments already support clean energy alternatives with feed-in tariffs and subsidies, and increasing cost-effectiveness has led to higher rates of adoption for green technology. The ongoing volatility of fuel prices is another reason to support energy alternatives.

Yet in the race to find the ‘next’ new source of energy, the vast importance of energy efficiency is often overlooked. Energy efficiency is where the mighty energy savings, which could slash CO2 in the atmosphere, are already starting to emerge.

Tiny efficiencies, huge gains

Small adjustments, added up, make a huge difference. If every car on the planet is built to run slightly more efficiently, the combined energy saving is enormous. Now consider if every light bulb, air conditioning unit, heating system, battery, mobile phone and so on, also ran on much less energy. The improvements globally could be enormous.

Semiconductors allow renewable sources of energy to run far more cleverly. Integrated circuits enable small-scale local grids; they manage power and current directions. They regulate and convert power and are highly likely to be found in almost every kind of new device.

Semiconductors can improve the efficiency of electricity; a semiconductor-based light-emitting diode (LED) can be up to ten times more efficient, and semiconductor technology is already making solar and wind power much more energy-lean and viable.

Identifying the innovators

Given the importance of semiconductor technology, it’s not surprising that the largest clean-energy companies in the world are semiconductor manufacturers: Schneider Electric, STMicroelectronics and ON Semiconductor Corporation. These companies are at the forefront of semiconductor research and development.

Schneider Electric is leading a digital transformation of energy management and automation. It is innovating in electric car charging, lighting control, power metering, solar and energy storage, and grid automation, among other areas.2

STMicroelectronics is an integrated device manufacturer, focusing especially on smart transport. A technology innovator, the company has a strong commitment to sustainability, and to the future of autonomous driving.2

ON Semiconductor Corporation manufactures semiconductor components for a wide variety of electronic devices and power solutions.2

Investing in the future of energy

These companies all feature in the underlying index of the Lyxor New Energy UCITS ETF.
Our fund offers investors a straightforward way to contribute to a cleaner future by investing in leading technology at the very forefront of alternative energy activities. Diversified across a range of clean energy companies that cover renewables, distributed energy and energy efficiency, the ETF has a proven twelve-year track record. This is a way to access the companies at the very forefront of alternative energy activities.

Un pionnier de l’investissement vert

Lyxor has a strong commitment to responsible and sustainable investment. We signed the Principles of Responsible Investing back in 2014 and are proud to take a stand and vote on important issues for the companies within our ETFs. We’re not shy of engaging in direct dialogue with companies if we believe improvements can be made. In addition, the carbon footprint of all our equity ETFs is available on our website.

We see green energy and the exciting innovations in semiconductor technology and energy efficiency as progressive, sustainable and potentially profitable ways for investors to invest in a better future.

This article is for informative purposes only, and should not be taken as investment advice. Lyxor ETF does not in any way endorse or promote the companies mentioned in this article. Capital at risk. Please read our Risk Warning below.

1Source: “A Smarter Shade of Green,” ACEEE Report for the Technology CEO Council, 2008.
2Schneider Electric, STMicroelectronics and ON Semiconductor Corporation information obtained from each company’s website.

Risk Warning

FOR QUALIFIED INVESTORS ONLY– This document is reserved and must be given in Switzerland exclusively to Qualified Investors as defined by the Swiss Collective Investment Scheme Act of 23 June 2006 (as amended from time to time, CISA).

This document has been provided by Lyxor International Asset Management that is solely responsible for its content.

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