Text by Hayden Bernstein, a contributing writer at The Capital Press
The Future of Green Energy Investment
It should come as no surprise that as the global demand for energy will only continue to rise. It is estimated that energy usage will increase nearly 40% worldwide over the next 20 years. This will be a challenge for all sectors of the energy industry and investors who are looking to alternative and renewable energy options to help meet these steep demands.
Alternative energy needed to meet growing demand
Unfortunately, there is no avoiding the fact that the fossil fuel will remain the most powerful player in the energy industry for the foreseeable future. Oil, natural gas, and coal will still account for 80% of global energy production come 2040. Still, investors are expecting alternative energies to make serious gains as demand swells. A recent study by Bloomberg New Energy Finance shows that the renewable energy sector is posed to receive $5.5 trillion in investment by 2030. Between 2004 and 2011, worldwide investment increased from $40 to $279 billion and is already up 16% from the last year (though it should be noted that much of this year’s gain is on the heels of a two year slump in renewable energy investment).
In past decades, investing in renewable energy has been an unpredictable if not volatile task. Especially when compared against traditional energy sources, the proportionally tiny renewable sector is overly susceptible to swings in government policy and public opinion and has been limited by the high capital cost of its complex infrastructure. Fossil fuels have been the safe bet for years, but that may be changing.
The winds of change
Today, renewable resources contribute approximately 11% of the world’s total energy; the majority of this clean energy is produced via hydropower. While hydropower will remain the most dominant form of renewable energy, wind and solar are predicted to increase their combined global energy contribution from 3% to 16% by 2030. And as is often the case, the key factors contributing to this double digit increase will be China and the developing world.
China is already the world’s number one producer and market for wind energy with more than 100 gigawatts of wind capacity. In addition to the already 65,000 operating turbines, China is building an average of 30 new wind turbines per day. For investors the building of new turbines is only a fraction of the overall investment opportunity. The cost (or opportunity, depending on who you ask) to operate and maintain this growing fleet of wind turbines is predicted to exceed $3 billion per year by 2022.
Emerging economies drive solar investment
In emerging economies such as India and Latin America, solar energy is poised to become a major contributor as well. Unlike the large scale and capital intensive solar farms in Spain and the American Southwest, the new trend in solar energy micro-production on individual rooftops. Solar panel technology has advanced the most out of all the renewable energy options in recent years, making it a viable option on a much smaller scale. Due to a lack of power grid infrastructure in these developing economies, rooftop solar will actually be a cheaper option for electrification. Brazil is home to the world’s largest rooftop solar farm and Central America is on pace to increase it’s solar megawatt output from 81% between 2015-2018. Though again, the bulk of solar-oriented funds are in China.
Divestment in fossil fuels
As investment in renewable energy is grows, there is a small but growing movement to “divest” in traditional fossil fuels. Whether for moral reasons, public relations buzz, or simply better opportunities for profits elsewhere in the economy (most likely the case), companies and investors are slowing their investment in fossil fuels. Google, a company dedicated to following data trends, is making strategic investments in renewables across the country and last year Stanford University removed it’s investment interests away from coal. The White Paper detailing this movement is careful to point out that the divesting in fossil fuels does not directly equate to investing in renewables. Even though a straight line can’t be drawn connecting these two investment trends, it is a fact that fossil fuel prices are going up while renewable prices continue to fall.
Renewable energy should be viewed in the long-term for investors looking to diversify their energy holdings. As climate changes affects more areas of our personal lives, it may be time to consider how it will affect our investment portfolios as well. There’s no doubt that our appetite for energy is growing and it’s up to us to decide how we will feed it.
About the Author
A contributing writer at The Capital Press, Hayden Bernstein is a Dallasite educated by way of University of Texas at Austin (M.A.) and San Diego State (B.A.). When not contributing content across the web, Hayden can be found plotting his next road trip on Google Maps and counting the days until South-by-Southwest.