Dollars and Sense
The Market for Renewables is Charged with Energy
With an entire generation of young men and women raised on the principles of green initiatives and environmental sustainability, the desire to invest in the renewable industry is at an all-time high.
From environmentally friendly sources of energy such as solar and wind to thermal power, biomass, hydrogen and hydroelectric, renewables are proving themselves to be cleaner alternatives to fossil fuels like oil, natural gas and coal.
Producing far fewer emissions such as sulfur dioxide, mercury, greenhouse gases (GHG) carbon dioxide, ozone, nitrous oxide and methane from burning fossil fuels, renewable options are fast becoming the choice for investors who care about the future of the planet.
According to recent data from New York-based Kenneth Research, the Global Renewable Energy Market is set to hit US$2,152.9 billion by 2025, a significant increase from $1,486.3 billion just three years ago, and a growth rate exceeding 4.90 percent.
According to market analysis, factors behind the increase include governments and public administrations worldwide making significant investments in renewable sources such as solar and wind because of their viability. There’s also a “rising awareness about carbon footprint management,” namely, curtailing GHGs and reducing pollution.
Worldwide, research institutes are optimistic about renewable energy as sources of electricity on their own, and with other sources like natural gas, which is much cleaner-burning than coal. The International Renewable Energy Agency (IRENA) predicts the increase in this global energy mix to rise from 19.2 percent (in 2014) to 36 percent by 2030.
With Kenneth Research far from alone in predicting massive growth in alternative energy investment, worldwide multinational professional services company Deloitte’s 2020 Renewable Energy Industry Outlook shares the optimism over green energy.
Renewables were responsible for generating 966 billion kWh of electricity in the United States in 2019 – second only to natural gas at 1,582 billion kWh – breaking coal’s record.
Wind and solar provided 23 percent of America’s power generation compared to 20 percent for coal, says the report. “In the first half of 2019, wind and solar together accounted for approximately 50 percent of total U.S. renewable generation, displacing hydroelectric power’s dominance.”
Part of the reason for the increase in wind power, solar, and other greener sources, comes down to the improved ability to store electricity from renewable sources in batteries.
Published less than a decade ago, the book Investing in the Renewable Power Market: How to Profit from Energy Transformation discusses the then-obstacles to renewable energy storage. Written by Tom Fogarty and Robert Lamb, the book discusses the benefits and risks of investing in green energy from “both an academic and a practitioner perspective,” outlining the pros and cons of alternative energy back in 2012.
“Solar power and wind farms produce power only when the sun shines or when the wind blows,” states the authors. “Often, they must spill off extra power if it cannot immediately be used in production. Science does not yet have giant new technologically innovative fail-safe batteries necessary to store huge amounts of wind or solar power overnight. Thus, by themselves, solar and wind power usually cannot be used for a financial loan guarantee covered by ‘liquidated damages’ for a seven-day-a-week, 24-hour-a-day continuous stream of energy necessary for the vast majority of investors or bank leaders.”
In recent years, the energy storage landscape has changed dramatically with disruptive battery technologies. From bulky and potentially dangerous lead-acid to nickel-cadmium in the past, the planet today works on lithium-ion batteries to power everything from our cell phones to home energy storage devices containing energy captured from the sun.
While lead-acid batteries have been used for years in alternative energy storage, they have a much shorter lifespan compared to lithium-ion batteries’ five to 15 years (depending on usage and maintenance), and which also function much more efficiently, and are compact.
And, with other battery types emerging including silicon-based, proton-exchange membrane (PEM), aluminum-ion, magnesium and others, it won’t be long before lead-acid based batteries are a relic of the past.
Practical and political factors
Trends reveal that significant demand for renewable power comes from not only environmentally-conscious investors, but residential, commercial, and industrial consumers.
According to Deloitte’s renewable energy industry outlook, American corporate contracts for renewable power broke records in 2018 (the most recent data), “as corporations signed power purchase agreements (PPAs) for 5.9 gigawatts (GW) of renewable energy in the first half of 2019,” adding that an estimated 99.6 percent of net new-generation capacity additions (~74 GW) this year is expected to come from solar and wind energy.
Other factors in favour of investing in renewables are the downturn and increased political uncertainty in fossil fuel markets, particularly in Canada and the United States.
That’s not all that’s weakened investor confidence in oil and LNG in Canada. There are ongoing rail blockades over the 416 mile-long (670 km.) Coastal GasLink natural gas pipeline project in British Columbia. Teck Resources Ltd. has walked away from a proposed $15.7 billion U.S. Frontier oil-sands project in Alberta.
And then there’s the recent decision by Warren Buffett-led company Berkshire Hathaway to pull out its $4 billion investment in a $9 billion liquefied natural gas (LNG) plant by Quebec’s Port of Saguenay.
Meanwhile in America, despite President Trump’s pledge to resurrect the coal industry from its decade-long slump, coal-fired power plants are closing at a record rate, including the massive Navajo Generating Station (NGS) in Arizona late last year.
The outlook of energy
From slowdowns and cancelled oil and gas projects to backlash over coal-fired plants and increasing concerns about climate change, markets worldwide are ripe for renewable energy investment. Worldwide it is estimated trillions of dollars will be spent in the coming years on solar, wind, water and other sources of clean energy.
Comprising power generation, heat and transportation, the opportunities for green energy investment are many, encompassing manufacturers and installers, utilities, biofuel producers, independent producers, and many others.
For investors, sources of information on renewables and opportunities include Invesco WilderHill Clean Energy ETF – which holds dozens of renewable energy stocks – and Exchange-Traded Funds (ETFs). Like investing in oil, natural gas and coal, there are perks and potential pitfalls to putting your money in renewables, such as increased competition bringing-down prices of solar panels, for example.
States go renewable
Despite this potential hurdle, more and more states across America are mandating reduced GHG emissions, and focusing on renewable sources of power. In March of this year, the Virginia Legislature joined TK when it passed Senate Bill 851. Requiring the state to obtain all power from renewable sources and nuclear, the move puts the state on the path of becoming 100 percent carbon-free by 2045.
At present, 24 states have joined the United States Climate Alliance, and are committed to lowering greenhouse gas emissions 26 to 28 percent by 2025.
In recent years, renewables consumption of hydroelectric power, solar, wind, ethanol, and other green energy sources has steadily increased across America. In late February, the U.S. Energy Information Administration announced that wind generation surpassed hydroelectric generation in 2019 for the first time, generating 300-million megawatt hours (MWh).
And according to the EIA’s Annual Energy Outlook 2020, it is predicted electricity generation from renewable sources like solar and wind are poised to exceed generation from nuclear and coal in just the next year, and natural gas by 2045.
Anticipating that renewables in America’s electricity generation mix will soar from 19 percent at present to 38 percent in 2050, the report goes on to say that wind and solar power – which already accounts for approximately half of the U.S.’ renewable electricity generation – will continue to lead the way, expected to account for almost 80 percent of the renewables market in the next 30 years.
No longer the pipe dream of scientists and hobbyists, clean alternative sources of power will keep gaining ground in the months and years to come. As the cost of manufacturing components for wind farms and solar arrays (multiple solar panels consisting of cells and modules) continues to drop, and with governments worldwide investing in green energy technologies, the opportunities for investing in renewables will continue to grow.