With further research and development in renewable energy, a stronger supply chain and the decline in the oil and gas industry, now may be the best time to invest in cleaner initiatives. Demand for energy across the world has increased, and with climate change at the top of many government agendas, renewable energy companies in the UK will likely see tremendous growth in the coming years.
The country is still bound by the National Climate Change Act, this requires an 80% reduction in greenhouse gas emissions by 2050. According to a report by the Office of Budgetary Responsibility (OBR), an estimated £8.4 billion will be spent on sustainable energy projects in the UK by 2021. Traders will have ample opportunity to invest and profit. As growth in the sector continues to rise, more and more firms are comparing and switching their business energy supplier through online energy comparison sites such as Utility Saving Expert. It’s now easier than ever to find a competitive deal and filter by contract length, tariff type and that all important price.
Why should I invest in renewable energy?
There are a number of reasons to invest in the sector other than the predicted growth, these include the following:
Ethical investing – Investing in this industry is an excellent choice when looking at it from the ethical perspective. Fossil fuels are being depleted, global demand for energy continues to rise, and it now makes more sense to invest in alternative fuel sources. Associated benefits include preventing climate change, protecting the environment and making energy accessible to more people across the world.
Technological growth – Advancements in research, development and manufacturing are occurring at a startling pace within the industry. Renewable energy production is becoming more efficient, increasingly reliable and costs are decreasing.
Job creation – Increased investment in this sector will create a large number of jobs across the globe. According to an MIT Technology review article, there are more than 10 million people involved in the production of renewable energy across the world. Development in rural areas will create the much-needed infrastructure to support local communities and businesses.
Improved trade – Investment in sustainable projects can positively affect trade. By importing less fuel, a nation’s trade balance is strengthened. This can reduce the burden of debt for a country through GDP growth. Demand for renewable energy production, services and equipment will steadily increase, boosting trade for all involved.
How do I invest in renewable energy?
Investors have a number of different options available to them, these have varying risk and reward levels. Here’s the most common routes to investment:
This is a lower risk option, allowing individuals and companies to directly invest in sustainable energy initiatives. One of the most popular low risk options is solar PV projects. Once installation has taken place and the system is operational, these aren’t as prone to failure. Local economies can benefit through community solar projects. These will in turn provide planning, construction and maintenance job opportunities.
Renewable energy bonds are one such example. It is worth knowing that while a retail bond is listed and regulated in the market, a mini-bond is not. Debentures can also be offered. These are regulated, tradable debt assets, and are similar to bonds. This allows you to invest in individual projects and can be held for up to 20 years.
Investing in renewable energy funds is another low-risk option. Through this, money from multiple investors will be used to purchase high-performing stocks, chosen by a fund manager. Weather conditions will have a significant impact on this form of investment.
Exchange Traded Funds
This is a medium risk option, although higher returns are possible. Exchange-Traded Funds (ETFs) have reduced the level of risk in comparison to previous years. Most industries will normally invest in stocks and their related companies. ETFs are similar to individual stocks, but combine multiple stocks together. Performance is comparable to major markets but offer a lower holding cost in comparison to funds.
Buying shares in renewable energy companies
These offer additional risk, so those who are risk averse may not wish to consider this option. Renewable energy stocks can be highly volatile, large market fluctuations can be commonplace in a short time period. Those who are interested in a high risk, high reward strategy should consider firms that primarily focus on green energy.
In summary, investment in renewable energy will provide solutions to many of the world’s challenges, especially across developing countries. As we work towards a sustainable future, research and development within this industry will only continue. No matter what level of risk you choose, risk management should always be used to guide how you trade. This will help you understand what level of risk is involved and the impact it may have on your finances.