Powering the green economy: It's all about investing in renewables

by Search Gate staff. Published Thu 22 Oct 2015 13:49, Last updated: 2015-10-22
Generating reliable financial returns from green energy

Helene Winch, investment specialist at renewable energy investment company, Low Carbon, shares her thoughts on divestment and why reinvestment in climate solutions is attractive not only in the fight against climate change, but also in generating reliable financial returns.

There is no escaping the fact that the divestment ‘movement’ is gathering momentum and global recognition. As Royal Dutch Shell chief executive Ben van Beurden publicised recently, oil prices are volatile by nature and “in years to come solar will be the dominant backbone of our energy system” , implying that more stable investment options like renewable energy schemes are looking increasingly attractive. There are serious growth opportunities and fixed returns to be had from divesting and then reinvesting into renewable energy projects such as solar parks or wind farms.

This positive action is happening now in both the Western world and developing countries such as India, which recently introduced a target of 100GW of solar capacity by 2022. Closer to home, renewables already command a large share in the UK energy mix, and outstripped coal for the first time this year. This means that we could soon be seeing an increased drive in the UK, and worldwide to create a truly low carbon economy.

Investors at the institutional and retail level can look to corporate giants and governments to lead the way. Facebook has recently invested in wind and solar to power its datacentres, Bill Gates has doubled his investments in the technology, and the Department of Energy and Climate Change (DECC) has declared onshore wind power as ‘the leading individual technology for the generation of electricity from renewable sources during 2014’. The facts are there for all to see, and the myth that renewable energy is too ‘new’, or ‘unproven’ a technology is swiftly being debunked.

It’s all about education

Divestment is a prevalent topic in the media of late, and high-profile individuals, governments and institutions such as the Church of England, the state of California, the Norwegian government and universities worldwide have voiced their support for the divestment cause. Additionally individuals and businesses responsible for at least $50bn in investments intend to sell all or some of their fossil fuel investments. Such public support and positive action can only help in the worldwide goal of mitigating the negative effects of climate change.

As well as helping to protect the environment, real financial returns are to be had from reallocating from fossil fuels. More needs to be done to raise awareness of climate solutions such as large-scale solar farms and onshore wind projects, which have the potential to improve the UK’s overall energy mix and ensure energy security for generations to come at a competitive price. Put simply, if we are to truly commit to a low carbon economy, we need to commit to investing in low carbon assets.

Reliable and proven technologies

With such a volatile oil price, today’s retail and institutional investors can look to renewable energy for a strong proven track record. As Shell has recently discovered from its Artic drilling ventures, you can drill for oil, but you won’t necessarily find it. Solar panels and wind turbines, on the other hand generate electricity all year round, and these investments can stand up for themselves financially. Investments in the solar and wind industries are forecast to provide the best financial returns over the next 35 years. Furthermore, a huge increase in the electricity demand in Britain has been met by renewable energy generation over the last few years, indicating that renewables are a core, resilient infrastructure that is here to stay.

Currently, there is a lack of UK legislation in place to motivate institutional investors into investing in climate solutions. In comparison, the French government is calling on institutional investors to be transparent and measure the carbon intensity of their investment portfolio, and this is happening informally in Scandinavia as well. This call to action and level of engagement should be emulated by governments in the UK and across Europe. This will power investments in climate solutions into the mainstream.

Moving towards reallocation

Reallocation into renewable energy assets as a climate solution has clear benefits - it can benefit the climate and our environment as well as our back pockets. Renewable energy can generate impressive, stable returns, and this is a fact that should not be dismissed. With only a few weeks to go until the United Nations Climate Change Conference in Paris (COP21), Low Carbon hopes to see developments made to benefit the renewable energy industry. More specifically, we also hope to see world leaders and global governments reach an agreement that transforms both the political and investor landscapes, in order to drive tangible change and in so doing help to mitigate the negative effects of climate change. This result is more than welcome here in the UK, with recent figures showing that 4 out of 5 Britons support renewables as a power source. Here’s to urgent progress, and to the continued and necessary fight against the negative effects of climate change.

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