Invest in the Future: Renewable Energy
As the world’s population and economic activity expands, it has become essential to identify energy sources that can provide for the population’s needs while being affordable, reliable and environmentally sustainable. Renewable energy sources, such as solar, wind, hydropower, geothermal and biomass, offer a potential solution. In recent years, the development of renewable energy sources has grown rapidly, and their global contribution to meeting energy demands is expected to increase significantly in the coming years.
Advantages of Renewable Energy Sources
There are many advantages of investing in renewable energy sources that make them a desirable choice both in the short and long term. Below are some of the most notable benefits:
Environmental Benefits – Renewable energy production releases no greenhouse gases, a major contributor to global warming and climate change. As renewable energy grows to meet more of the world’s energy needs, the associated environmental benefits will include reduced pollution and improved air quality, particularly in cities where air pollution is a major concern.
Economic Benefits – Renewable energy sources have long-term stability in terms of energy prices compared to fuels consumed in traditional energy production such as coal, oil and gas, and the sustainability of these sources can hedge against potential future volatility in fossil fuel prices. Additionally, local economies can benefit both from direct investment in renewable energy sources and from greater energy security.
Energy Security – Renewable energy sources provide energy security by diversifying the energy mix and providing a more reliable electricity supply. As renewable energy becomes more prevalent, countries will no longer be held hostage to the global price of the fuels used in traditional energy production.
Current Trends in Renewable Energy Usage
Renewable energy sources now comprise about 18% of the total global energy supply, and that share is projected to grow significantly in the years to come as countries invest in the technologies required for their implementation and production capacity increases.
Solar Energy – Solar energy is the world’s fastest-growing source of electricity and is expected to be the largest single source of electricity by 2050. In 2019, there were more than 500 gigawatts of solar capacity installed worldwide and this number is projected to continue to grow in the coming years.
Wind Energy – Wind energy is the second-fastest growing source of electricity. Global wind capacity reached 580 GW in 2019 and is projected to reach 840 GW by the end of 2021.
Hydropower – Hydropower accounts for a larger share of global renewable energy production than both wind and solar and is the most reliable and cost-effective renewable energy source. Hydropower has grown steadily over the last decade, with total global capacity reaching 1,136 GW in 2019.
Geothermal and Biomass – Geothermal energy accounts for a much smaller share of renewable energy production but its potential for expansion is great. Global geothermal capacity has grown slowly but steadily over the last decade, reaching 13 GW in 2019. Biomass energy, which is produced by burning organic materials, is a reliable source of energy but is limited by the availability of feedstock and its environmental impacts.
Opportunities in Renewable Energy
Though the renewable energy sector has grown rapidly in recent years, there is still significant room for additional investment and growth in the coming years. The International Energy Agency (IEA) has projected that renewable energy production will need to double in the decade from 2020 to 2030 in order to meet the world’s climate goals and offset the declines in other fuel sources such as coal and oil.
Many countries around the world have set ambitious targets for increasing their share of renewable energy in their domestic energy mix. China has announced its intention to reach 20% renewable energy use by 2030 and has made significant investments to reach that goal. The European Union has committed to 40% renewable energy by 2030, and countries including the United Kingdom and France have set even more ambitious goals.
The International Renewable Energy Agency (IRENA) estimates that an investment of $2.9 trillion in renewable energy by 2050 could generate $4.9 trillion in economic benefit as the sector grows. In order to reach this goal, investments are needed both from traditional investors and from governments investing in the infrastructure required for renewable energy production and use.
Investing in Renewable Energy
The growth of the renewable energy sector presents an opportunity for investors to get in on the ground floor of a sector with huge potential for growth in the years to come. Many investors have already recognized the benefits of investing in renewable energy and have begun to invest in the sector.
Equity investments in renewable energy are available through a variety of vehicles. These include mutual funds, exchange-traded funds (ETFs), and individual stocks. Renewable energy-focused funds invest in companies that produce, develop or use renewable energy sources, while other funds invest in a variety of energy-related companies. ETFs provide low-cost access to a diversified portfolio of renewable energy companies, while individual stocks offer the potential for higher returns but come with higher risk.
In addition to equity investments, investors can also invest in debt securities related to the sector. These investments include corporate and government bonds, loan funds, and green bonds. Corporate bonds are debt issued by companies involved in the renewable energy sector, while government bonds are issued by governments investing in renewable energy projects.
Conclusion
Renewable energy is no longer viewed as a fringe alternative to traditional energy sources but rather as a viable and increasingly necessary part of the global energy mix. Renewable energy sources offer numerous environmental, economic and security benefits when compared to traditional sources. Governments around the world have committed to increasing their share of renewable energy in their domestic energy mix, creating a strong incentive for investors to get involved in the sector. Equity investments and debt securities related to renewable energy offer potential for both income and capital appreciation in the coming years as the sector continues to grow. Investing in renewable energy is a great way to invest in the future and have a positive impact on the world.