As you read this article from a screen, you are using energy. But where does that energy come from? For an increasing percentage of the world population, the majority of this energy is coming from renewable sources.
As the impact of climate change continues to grow, global investment in renewable energy has reached a historic high. Renewable energy received record breaking investment from governments all over the world in 2023. According to the International Energy Agency, more than $1.7 trillion was invested in technologies such as wind, solar power, electric vehicles, and batteries globally. While the environmental benefits from the switch to clean energy are vast, so too are the financial opportunities emerging from this transition
Growth of Renewable Energy and Green Technology
According to Fatih Birol, the Executive Director for the International Energy Agency, “Clean energy is moving fast – faster than many people realize.” Emerging technologies have reduced the price of renewables and investment trends show that clean energies are now seeing larger growth than fossil fuels. As little as five years ago, the ratio for dollars spent on clean energy versus fossil fuels was one-to-one. Now, for every dollar spent on fossil fuels, about 1.7 dollars are being invested in clean energy.
Solar panels, wind turbines, and battery-powered cars were once considered unreliable and expensive for mainstream use. However, times have changed. Electric vehicles are now a common sight on the road, and many of them are increasingly powered by solar and wind. Since 2009, the price of solar power has dropped by 83 percent. In 2023, global investment in solar power was expected to reach $380 billion – more than will be spent drilling for oil. The price of wind power has dropped by 50%, while the price of lithium-ion battery cells has fallen over 97% in the last three decades.
All of this investment is reducing the emission of greenhouse gasses from fossil fuels that contribute to climate change. However, even with these advancements, it is not certain that the world will reach emission targets that could keep global warming under 2°C. Continued investment in renewable energy will be necessary to avoid the worst projections from the Intergovernmental Panel on Climate Change (IPCC).
Investing in Renewable Energy
Renewable energy projects traditionally have higher up-front costs than those in fossil fuels. The capital required for the development and manufacturing of renewable energy production and storage is significant. Yet, as the cost of these technologies continues to decrease, renewable energy projects are becoming more viable. In the case of solar, the decline in costs have made it an increasingly attractive alternative to fossil fuel, even for small businesses. Return on investment from renewables can provide a stable flow of cash but can also have longer periods for repayment. However, two tax credits outlined in Biden’s Inflation Reduction Act help offset the initial investment cost: the investment tax credit (ITC) and the production tax credit (PTC). There are also tax credits available for individuals wanting to get solar for their homes.
There are also environmental and social considerations to investing in renewable energy. Renewable energy projects, just like any energy projects, have impacts on the ecosystems where they are constructed. Environmental impacts are not relegated just to initial construction but continue throughout the entire lifespan of the project, including disposal. For wind and solar projects, abundant flat space is needed, and ideally this land can be used in other ways as well. For instance, mounting solar projects on roofs (space that would otherwise go unused) or building turbines on farmland provide multiple benefits.
With global investment in renewables increasing, so are job opportunities in this sector. Renewable energy projects have the potential to boost local economies and provide a path towards a sustainable economy. Access to affordable energy is increasingly important for underserved communities and investments in renewable energy projects can increase access and job opportunities.
It’s important to note that investing in renewable energy doesn’t have to be an entire business project. You can invest in renewable energy right from your home using your money, and the idea that investing sustainably means sacrificing profitability is a misconception. The last year has seen record levels of investment in renewable energy, and the opportunities to invest with environmental stewardship in mind while also seeing sustainable financial growth are becoming more common and mainstream. Renewable energy is not just a trend; it’s the future. Investing in renewable energy can benefit both the environment and your investment account. If you are environmentally conscious and looking to grow your portfolio, contact EGÉA SRI for more information today!
