According to the International Renewable Energy Agency (IRENA), investments in renewable energy sources particularly solar and wind rose by 8.3% in 2017.
Another study by Wall Street Journal showcases that expenditure and investments on green energy sources were twice those spent on other sources of energy including nuclear, coal and fossil fuels in 2016. Renewable energy growth capacity Stats in 2018 are yet to be released but what is vivid is a positive trend in an increment in global investments in wind and solar power. However renewable energy investments exceed fossil investment globally.
Increasing investments are due to tax credits, rebates, and incentives provided by various countries to promote the installation of renewable energy. Moreover, the increasing cost of electricity and the fluctuation of prices in fossil fuels has triggered investors and consumers to search for an alternative, eco-friendly and reliable sources of energy.
In fact, companies such as Siemens have announced layoffs because of the dwindling demand for equipment that is needed in the production of electricity. Also, fossil layoffs are bound to increase as companies in these industries grapple with low demand for their products. A mix of factors and synergies from all directions has proliferated the growth of solar power. For instance, technology and innovation have enabled manufacturing of powerful, efficient and durable solar panels and wind turbines giving them an edge as they provide consistent wattage.
Global Growth
According to the UN and Bloomberg New Energy Finance, a total of 157 gigawatts of renewable energy was commissioned in 2017 outshining 70 gigawatts of fossil fuels produced in the same year. While the global generation of green energy has risen tremendously over the past decades, its growth is internationally skewed with developed economies claiming a huge share of the gamut of investments already in the ground. Nonetheless, the demand for clean energy in China sparked growth in the industry in 2017 making China contribute almost a half of the global investments. Other developing nations like Brazil and India have allocated a substantial budget to subsidize solar and wind power installations.
The US hosts most of the venture capital and equity funding firms that are interested in promoting growth in renewable energy. For that reason, it remains the global leader in green energy investments. The growth in the US and other developed nations owes to increased research and development as well as high level of public, corporate and government markets. In Europe, countries like France, UK, and Germany are the leading markets. Developing countries in Europe such as Greece, Turkey, and Ireland have also increased their spending on solar and wind power.
China boasts of the largest solar energy investment so far owing to the reduced costs of acquiring and installing solar panels in this Asian country. Other developing economies that have shown significant investments in green energy include Jordan, Morocco, Egypt, Rwanda, South Africa, and UAE. For newer investments, the developing world is ahead with China, Brazil and India allocating a sizable amount of resources in the sector.
Key Factors Driving Global Investments in Wind and Solar Power
Indeed, investments on solar and wind power is outshining fossil fuel investments because the world is moving towards sustainability.
Some of the key drivers of the renewable energy ventures include:
- Extensive subsidies, tax credits and consistent support from governments
- Availability of funds from equity and capital venture institutions
- Increasing costs of production of fossil fuels and electricity
- Costs of solar and wind energy installations have fallen substantially over the years
- Supportive policies that foster clean energy integration in the national grid
- The benefits of renewable energy outshine those of fossil fuels. This makes a renewable energy investment more attractive than a fossil investment.
Countries and firms pursuing green energy have already experienced its benefits motivating investors to upscale existing renewables and encouraging the development of blueprints. Also, the global policy momentum on creating favorable investment avenues for clean energy is gaining traction making it easy and cheaper for investors. Major renewable energy competitors such as coal and fossil fuel investors are disadvantaged by these policies making it easy for solar, wind, geothermal and other green energy investments to penetrate regional and global markets. Therefore, the growth capacity of global ventures in regard to eco-friendly energy sources is expected to rise steadily for the next couple of years.
The growth of Renewable Energy Firms
Companies like Energy Wall and Solar Link International have become popular and continue to grow because of their investments in renewables. Energy Walls manufactures housing and building construction components that provide homes with required insulation to save on energy costs. Solar Link International produces solar panels and photovoltaic batteries that enable consumers to harness solar power.
According to the Bloomberg New Energy report, most of the listed companies dealing with manufacturing or investments in this sector are performing well in the stock markets. In fact, the report notes that Solar Edge Technologies, a maker of rooftop electronic components for solar systems was the leading stock on the NEX in the first months of 2018.
As firms keep eyeing on renewables, it is important to note that some clean energy companies in Europe such as Nordex (wind turbine manufacturers) are facing a hit by a decline in demand of their products and constant drive by lobby groups to lower down the turbine prices. Examining and performing the extensive market analysis is necessary to prevent sharp drop in demands. Of equal importance is diversification of clean energy investments to help cushion the firm when one of the renewables demand falls.
Firms can focus on developing countries as those can be the next emerging markets that can provide vibrant grounds for investment. It is easy to ward off renewable energy competitors in these nations because they are mostly located in climates where there is sufficient solar and wind energy. A considerable solar energy investment in these countries can turn out to be highly profitable and sustainable due to the all-year-round presence of solar power. Additionally, these countries attract FDIs so that the locals can get employment opportunities as the country benefits from foreign exchanges.
Enterprising investors should be intrigued by the inexorable growth of the clean energy industry. Its reliability, affordability, and sustainability make it an ideal choice for most nations. As investors focus on, established markets and emerging markets in developing countries can provide a good fortune. The global generation of renewables outstrips that of fossil fuels by far leading to increased fossil layoffs. This trend is promising and is likely to continue throughout the 21st century.
