How Green Energy Investments Are Now Actually Beating 'Black' Fuels

A recent UN backed report released findings stating that for the first time in history, green and renewable energy tipped the scales, receiving more funding overall then traditional fuels. Interestingly, this statistic does not include large scale hydro, which has been the dominant player in greentech for decades. These findings come at a time when oil is cheap and staying cheap, yet it seems that investors must be seeing this as an indication of traditional fuel’s ever shallowing vital signs and possibly an omen for change.

The Global Trends in Renewable Energy Investment report found that renewable tech such as solar and wind makes up over half of all energy investment, while hydro makes up an additional 10% or just below that figure. Coal and Gas however, made up just over 30% of the total energy investments made last year. Last years spending has net a rew record for renewable investment, sitting at US$286 Billion and outperforming the previously held figure of $279Billion (2011).

The United Nations Environment Program stated that, “ ...the annual global investment in new renewables capacity, at $266 billion, was more than double the estimated $130 billion invested in coal and gas power station s in 2015.”

While right leaning political sentiment likes to label green energy as an expensive luxury, afforded to us by our developed society and wealthy economy, the data shows otherwise. Most plants scheduled for production are actually located in developing countries such as India, where over 300 million people don't have access to electricity. In fact, developing countries topped the charts, above developed countries in regards to renewable investment. Specifically, India increased its renewable energy production by 39%, while South Africa added 329% after $4.5Billion was invested (click here for the UN report). This correlates to dropping wattage expense among all renewables, however Solar PV has shown a steady downwards trend in cost for years. In fact, the energy capacity increase across all technologies was topped by solar PV which increased its potential for power production by 54%. It can be said that for developing countries renewable energy is now seen as a pollutant free, cheap alternative and judging by investment trends, one that shows great Return On Investment.

This has also been proven by a study which stated that out of 1400 green and black energy funds, renewables outperformed traditional fuels by up to 14%. In the past, when the technology was still developing, and costs were significantly higher, green investments were made as more of an ethical responsibility then anything else, however clearly the tables are turning.

“Having performed poorly when compared to black and conventional funds throughout the 1990s and the early 2000s, mutual funds focused on green investments seem to have come of age,” stated Gbenga Ibikunle, the research lead. Andreas Hoeppner, a fellow finance professor aid stated that it was his belief that the research would spur on further investment in the industry and open up the playing field to a wider variety of investors. Based on the data of the recent investment trend, among other factors, it has done just that as most of last years capital came from traditional funds. In the 2000s, many green companies were for the most part R&D ventures attracting Venture Capitalists and private equity funding, which led to the failed cleantech boom. However, as the market and the industry matures, we are seeing the big banks provide most of the up front capital and financing options. In fact $200 Billion of the $286 Billion spent on renewable energy, was asset finance provided by larger financiers.

Separate from renewable energy production, the report also focussed heavily on the rise of hybrid and battery storage, ranging from utility to residential size projects. The report stated that electric vehicles have assisted in rapidly dropping cost for energy storage. Specifically, the price of storage has dropped from $1000kWh to $350 kWh, meaning we are on our way to affordable hybrid solar. Due to this price drop 2015 saw 250MW of storage installed, which is a dramatic increase from 160MW in 2014. However more excitingly, over 1GW of storage was announced in 2015, meaning construction for such projects will start in the near future, while some may have already begun.

However, it seems that not all is well in the world just yet as many developed countries are dragging their feet. While developing countries have shown, as previously mentioned, an increase in renewable production, the developed world has decreased its production by 8%. In 2015, developed countries contributed around $130 Billion, yet 2014 saw $142Billion. More surprising is that in 2011, the year which held the record for the largest investment in renewables, the funding was conducted primarily in developed countries. In fact $191 Billion was invested, while developing countries only contributed $87Billion. This is a huge turnaround and shows that the global renewable industry is in a very different place from 2011.

Many are seeing this as the beginning of the end for coal and fossil fuels as countries are turning away from traditional energy providers and towards greener technologies. In fact a Bloomberg report stated it expects to see the difference in renewable investment increase to 4 times that of traditional fuels. The interesting thing is that most oil and coal production goes to towards transportation, heating and chemical manufacture. However, as the electric car continues to prove itself as a suitable replacement for the internal combustion engine, we may see a further drop in demand for oil and coal. A little known yet long held economic relationship between crude and GDP is also starting to unravel. Essentially, as our populations and economy grew, so did our carbon emissions. Now, this isn't as true as it used to be, as CO2 production slows and GDP continues rising steadily.

It seems that we can sometimes forget that, in the midst of rising international political tension, increasing economic uncertainty and disparity and the decreasing excitement surrounding every new Apple release, nothing matters if we don’t curb our emissions in time. It's good to see that things are finally taking a turn for the better, at least on this front.

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