Environmental policy and ecology are increasingly high up on the agenda in politics and among corporations. For us consumers, choosing eco-friendly products only might become the norm in a not too distant future. Obviously, anything that has to do with a cleaner future might also do great as an investment. We at Advice4Finance have put together a short guide on how to explore green energy sources from an investor’s perspective.
Why green energy?
The benefits of green energy are many. The obvious answer is that clean energy is good for the environment. It makes us save the planet. The frequent reports on global warming and climate change give a sense of urgency, and yes, we seem to be in a pretty bad situation. This is the first argument of why explore green energy sources more in depth. Better late than never.
However, there are more benefits of green energy. Did you know that renewable energy can be more reliable than traditional sources of energy? The reason is that most green energy sources are exploited in multiple smaller units rather than in large power plants. If disaster strikes in one area, production facilities elsewhere can make up for the loss in production.
Green energy and clean tech will require more research and development, which is likely to contribute to a demand for highly qualified jobs. The population will also benefit from fewer health problems as coal power and other fossil fuel power production are phased out. Better health equals lower spending on healthcare costs.
With renewable energy we do not have to worry about running out of energy. Oil reserves might never be depleted completely because prices will increase before supply becomes to scarce, but yes, oil is a finite resource while clean energy is not.
Will there be enough of it?
One concern with green energy is that we are not producing enough of it. Tesla is revolutionizing the electric car market. All major car makers are picking up the competition and are preparing their new range of electric vehicles. Now, as even a long range electric skateboard has appeared on the roads, we ask ourselves – will there be enough green energy to power every machine and appliance out there?
Roughly speaking, around about one fifth of the world’s energy production comes from renewable sources. If our new electric vehicles and other electricity consumptions is going to get truly clean, we will need a lot of investments within clean tech and green energy production.
According to IEA, renewables will see the fastest growth within electricity production. In 2023, it will provide for almost 30% of power demand. In 2017, this figure was 24% with bioenergy and hydropower making up over 80% of the mix.
For sure, no investor can neglect the potential there is within green energy.
What green energy sub-sectors are there?
So, where to invest our money? The key in getting reliable green energy production is to achieve a mix of production means rather than relying on one single source. Countries who are exploring the options in expanding their green energy production look into creating a mix of reliable sources of energy. Investing in green energy must not come at the expense of reliability.
IEA recognizes seven main types of green energy:
- Bioenergy: Wood, wood waste, manure, straw and other materials from biological sources.
- Hydropower: Dams – impoundment facilities, pumped storage facilities and run-of the river facilities.
- Wind: Wind energy from turbines, on-shore or off-shore.
- Solar PV: Solar power from a photovoltaic system that converts sunlight into electricity.
- Solar thermal: The use of sunlight for heating or electricity production by other means than through photovoltaic solar panels.
- Geothermal: The use of heat from the Earth’s crust.
- Marine: The harvesting of sea movements through waves or tides.
Searching for stocks within each of these sectors could be a good starting point for investing in green energy sources.
There are plenty of companies operating within the renewables energy sector. Here are some of the biggest players:
- First Solar (FSLR) – solar power
- Cosan (CZZ) – biofuels
- Pattern Energy Group (PEGI) – wind power
While all of these might make a good investment, it is not to be seen as an investment advice by us. Rather, regard this as inspiration and go out explore the exciting world of renewable energy yourself!