Earth Day: Ukraine War Pushes Energy Efficiency Rethink

Download PDF

The Ukraine war has realigned economic priorities: countries are scrambling to secure stable food and energy supplies. The EC aims to replace 100 bn m3 of Russian gas this year by tapping alternative supply sources (such as LNG from the US) and boosting capacity in renewables. Non-renewable production is being ramped up everywhere to plug the immediate gaps, but the energy shock is a huge boost for renewables, including wind and solar power. Figures 1 and 2 show the impact of efficiency measures and the relative efficiency of various energy sources.

Detailed consensus credit data is available on Bloomberg or via the CB Web App, covering many otherwise unrated companies. Contact Credit Benchmark to start a trial or to request a coverage check.

Figure 1: Changing Habits vs Changing Technology

Figure 2: Energy Efficiency

One of the most effective ways of curbing CO2 emissions is greater efficiency in energy usage from any source – by insulating homes, turning down heating, and using less hot water.

Non-renewables are also highly efficient; but some of the greenest technologies are also paradoxically dependent on the increasingly volatile climate. Until large scale energy storage becomes cost-effective, diversity in technologies is critical to ensure stable supplies from renewable sources.

Consensus credit ratings cover 41 wind companies and 51 solar companies. Figure 3 shows the Investment Grade (IG) High Yield (HY) balance for each.

Figure 3: Mar-22 IG/HY balance; Wind and Solar

Over 80% of the companies in the wind power consensus aggregate have an investment grade rating.

More than half of companies in the solar power consensus aggregate are investment grade.

The proportion of investment grade companies in the Conventional Electricity sector in various geographies is typically in the range of 60% to 70%.

For traditional Oil & Gas companies, the investment grade proportion is 47%.

Figure 4 shows credit trends for these wind and solar companies.

Figure 4: Credit Trends; Wind and Solar

At the beginning of the COVID crisis, average solar company credit risk increased 26%. Credit quality modestly improved from early 2021 but this has faded in recent months.

The pandemic had less impact on wind company credit risk, deteriorating from Mar-20 to Nov-21. Recent months show signs of stabilisation and possible improvement.

The Ukraine war is changing the credit landscape – any shift towards green energy is likely to be reflected in major credit improvements in these aggregates.

Figures 5.1 and 5.2 shows Credit Consensus Ratings and country of risk for some of the companies included in these aggregates.

Figure 5.1 Solar Companies

Figure 5.2 Wind Companies

Companies on this list have limited or no rating agency coverage, so the Credit Consensus Rating shown here may be the most robust (or only) estimate of credit available.

Enjoyed this report? If you’d like to see more consensus-based credit ratings, mid-point probabilities of default and detailed analytics on 60,000+ public and private global entities, please complete your details to start a trial or to request a coverage check:

    By clicking the "Submit" button, you are agreeing to the Credit Benchmark Terms of Use and Privacy Policy.

    Sovereign Bond Risk Management

    In the current low yield environment, many Sovereign bonds issued by different countries are priced at similar levels. However, this Read more

    Introduction For Credit Portfolio Managers

    Credit Benchmark is a market-led response to three of the most critical issues facing credit risk professionals: 1) The need to Read more

    Sovereign Default Risk In Developing Economies

    This paper examines the use cases for Credit Benchmark’s Consensus Probabilities of Default (Consensus PDs), in the context of more Read more

    Impact Of BCBS Proposals On IRB Banks

    The Basel Committee on Banking Supervision recently published wide-reaching proposals for reducing variation in Credit Risk Weighted Assets, with a Read more

    Follow us on:

    Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.