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Seizing the green wave: is there still a case for strategic investment in renewable energy?

Globally, the roadmap to Net Zero by 2050 requires nearly 70% of all energy to be delivered by renewables. But is this viable – and what are the prospects for investment in renewable energy?

| 6 min read

Recent headlines highlight UK use of gas and coal for electricity is at its lowest since 1957. In the ever-evolving landscape of global energy, the rise of renewable sources has emerged as a transformative force, presenting a unique and compelling opportunity for investors.

The significance of renewable energy

Renewable energy, harnessed from sources like solar, wind, hydropower, and biofuels, is more than just a buzzword; it's a vital component in the global pursuit of decarbonisation and reaching Net Zero by 2050. The escalating generation capacity, propelled by policy support and cost reductions, has paved the way for a paradigm shift towards a Net Zero future. A consensus has emerged that transitioning to renewable sources is essential to ensuring stable and affordable energy, achieving universal energy access, and fostering robust economic growth.

Costa Rica stands as a shining example of the transformative power of renewable energy, with over 98% of its electricity derived from renewable sources. This success story highlights the possibilities when nature is leveraged, and long-term investments are made to decarbonise.

The unprecedented opportunity

The roadmap to Net Zero by 2050, outlined by the International Energy Agency, mandates a staggering 70% of global energy to be sourced from renewables. This vision is underscored by the Paris Agreement, a binding treaty signed by 196 nations in 2015, committing to combating climate change. A massive influx of capital has been directed towards achieving these ambitious targets, with an ever-increasing commitment evident in successive COP conferences.

This commitment translates to an exceptional investment opportunity – one of the most significant of our lifetime. The need for replacements, structural enhancements, and upgrades in transmission, distribution, and energy efficiency opens avenues for stakeholders to take an active part in the renewable energy revolution.

How is investment in renewable energy progressing?

Recent years have seen remarkable progress, with 2022 setting a record for adding new renewable electricity capacity, totalling approximately 340 gigawatts (GW). And in 2023 Portugal reported a six-day run where 100% of energy demand was provided by renewable energy. The global energy crisis triggered by geopolitical events such as the Russian-Ukrainian war, has further accelerated the momentum towards energy security and renewables.

Forecasts for the next five years predict a substantial growth of almost 2,400GW, an 85% acceleration from previous projections. Renewables are poised to dominate, accounting for over 90% of global electricity capacity expansion.

China, the European Union, the United States, and India are at the forefront of this surge, implementing existing policies and introducing new ones at an unexpected pace. Notable among these are China's 14th Five-Year Plan, the REPowerEU plan in the European Union, and the US Inflation Reduction Act.

The challenge and the 'disorderly transition'

While solar technology is on track for Net Zero by 2050, other renewable sources need to ramp up significantly. For example, non-bioenergy renewables must increase from 5% of energy production to approximately 17% by 2030. The current trajectory, though rapid, falls behind the curve, necessitating a 'disorderly transition' towards aggressive decarbonisation efforts as we approach 2050.

Governments, policymakers, and businesses will need to navigate a delicate balance between averting unintended high costs for citizens and supporting the business case for new renewable energy investments. It is likely, the closer we get to 2050, more aggressive capital-intensive approaches will be implemented to meet global targets.

Abundant investment opportunities

Despite the challenges and potential disorderly transition, opportunities for renewable investments abound. Substantial sums of money are flowing into renewables, with even traditional fossil fuel companies adapting to the changing landscape. Recent examples include a UK-based renewable energy developer obtaining planning permission for a grid-scale battery energy storage project in Leicestershire, Octopus Energy investing £200m in technology to capture data centre heat to reuse it to heat public leisure centres, and Barclays establishing an Energy Transition Group to advise clients on the path to Net Zero as many corporates have identified climate risk as a major threat to longevity.

Numerous global initiatives showcase the diverse avenues for investment, ranging from grid fortifications in Taiwan to substantial growth in global renewable capacity dedicated to producing hydrogen as a substitute for natural gas and petrol. Further, we have witnessed the EU adding 17GW of new windpower in 2023, a record year, which could offer a reprieve to many of the ‘brown’ industries across Europe threatened by the phasing out of coal power. These opportunities, and subsequent threats, underscore the adaptability and resilience of the renewable energy sector, making it an attractive arena for strategic investments.

Ongoing challenges and the path forward

Renewable energy is not without its challenges. Intermittency, cost considerations, infrastructure development, and public acceptance all pose ongoing threats. However, collaborative efforts, technological innovation, and supportive policies are instrumental in overcoming these challenges – and we are witnessing these efforts.

In conclusion, the renewable energy sector is not merely a promising pathway to a sustainable future; it is an economic frontier ripe with opportunities. The unprecedented commitment towards Net Zero, coupled with the rapid expansion of renewables, underscores the sector's potential for exponential growth. This moment offers the chance to be strategically part of a transformative movement, contributing to a sustainable future while reaping compelling financial rewards.

At Charles Stanley, we continue to assess the viability and longevity of each of these opportunities to ensure that your wealth is being invested in compelling and rewarding investments.

Please note: This article was released prior to SDR and thus the information may not be in line with the Anti-Greenwashing rule but contextually is appropriate for the time it was written.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

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