These days, there has been a lot of talk about the Paris Climate Agreement. As citizens of the world, it is up to us to do our part in keeping our planet clean. I’m not telling you to grab a trash can and start picking up garbage on the side of the road. As investors, you can help do your part by trying to invest in clean energy and in companies that are environmentally conscious. Investing in clean energy doesn’t make you a hippie, it can however make you rich!
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First and foremost, what is renewable energy?
According to Penn State College of Agricultural Science “Renewable energy is energy that is generated from natural processes that are continuously replenished. This includes sunlight, geothermal heat, wind, tides, water, and various forms of biomass. This energy cannot be exhausted and is constantly renewed.”
What does the future look like in the energy market and how can you invest in new energy stocks?
As we inch closer to the tipping point of being able to save the earth from ourselves, we have to start looking at renewable energy sources as a way to wean ourselves of old energy. The question becomes: do the prevailing economic winds indicate that renewables are here to stay?
Are Renewables going to take off?
Renewable energy sources are poised to take over the global share of energy sources in the future. According to REN21’s 2016 report, renewables make up nearly 20% of global energy consumption. By 2030, renewable energy sources are expected to grow to over 60% of market share, totalling 5,579 gigawatts of new generation capacity. In that time span, the share of fossil fuels will drop 20% from its over 70% share today.
There’s a lot of money going into this area. In 2015, total global investment in renewable power and fuels was $285 billion dollars. Certain countries are ahead of others already, with Germany being a particularly trend-setting example. The German’s renewable energy sector contributed to just under 3% of total energy consumption in 2000. Today that number has quadrupled to 12%.
An interesting development will be the adoption of rooftop solar grids in emerging markets. In a lot of these countries, there is a dearth of reliable energy infrastructure to suit the old energy needs. Cheap, easy to install rooftop solar grids will be used frequently in these markets. It is estimated that, in Latin America, 102 gigawatts of rooftop solar panels will find homes by 2030. The rising costs of importing natural gas in Asia should lead to more Asian countries adopting this method as well.
Where to invest?
There are a few ways you can invest in renewable energy stocks:
The first is the big one: General Electric. They are heavy into renewables and new energy equipment. They also still have big holdings in old energy, so you’re hedging your bets a little bit. In 2016 GE generated a record $9 billion from their renewable energy segment versus $12.9 billion from oil & gas.
You can also look at up and coming renewable energy stocks from companies that are focused solely in the sector. Tesla comes to mind. Tesla is really starting to burst at seams in terms of its market share. It’s starting to rival a lot of old firm car manufacturing companies. The downside, unlike GE, for example, is that if there is a green energy bubble and it bursts, Tesla might go down the drain pretty quickly.
ETF’s are also a good way to invest and still hedge your bets on renewables. The PowerShares WilderHill Clean Energy ETF allows you to invest in over 57 green energy firms. As of right now, this ETF is losing about 7% a year, and compared to the S&P 500 which is up about 8% per year, it doesn’t sound too appealing. Getting in this low, however, with the knowledge of how much renewable energy spending is on the horizon might be a great play.
Renewable energy is growing all around the world. From green energy companies leading the technological development side in the first world to practical applications in the emerging world, green looks to be the wave of the future. Investing in renewable energy now, at a relatively low price point could show some serious returns in the long run.
Don’t miss out on a chance to help save the planet one stock at a time.