A Guide to Renewable Energy Investment

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A Guide to Renewable Energy Investment

As we continue to contribute towards climate change every day with our non-eco-friendly fuel sources, such as oil, gas or coal-powered energy in our everyday lives, the world will get closer, causing average global temperatures to increase beyond 3°C and, in turn, affecting every ecosystem.

Although we know the importance of taking action on climate change, is it a good thing to invest in if you’re looking to make money? And if you’re not looking to make money and just want to invest in our future to create a more sustainable environment, how can you do so?

Well, in today’s article, we’ll look closer into renewable energy investment, getting a feel for the different types of renewable energy, how you can invest in renewable energy, whether it is a good investment for your portfolio, and what the future holds for this sector. Carry on reading to learn more!

 

What Are the Different Types of Renewable Energy?

There are five different types of renewable energy that we can use in everyday life, including:

    • Wind energy
    • Solar energy
    • Hydropower energy
    • Biomass energy
    • Geothermal energy

 

1. Wind Energy

Wind energy, hence the name, uses wind for electricity generation through technologies such as wind turbines. These wind turbines have blades that spin when the wind is blowing and when they’re rotating, they essentially turn a generator, creating electricity to flow from the head of the turbine.

 

2. Solar Energy

Solar power captures energy from the rays of the sun and turns it into electricity by using solar panels. Therefore, if you’re looking to power a home or business in a more eco-friendly way, solar panels are your go-to source.

 

3. Hydroelectric Energy

Hydroelectric energy, also known as water energy, uses moving water as a means of generating power. This flowing water essentially spins turbines, which generate electricity in power plants. The dam will control water flow, which then creates pressure to drive the turbines, producing renewable energy for people to use.

 

4. Biomass Energy

Biomass energy uses organic matter such as wood, crops, residues, and animal waste. Although it is not as environmentally friendly or pleasing as the other sources of renewable energy, it still changes when burned or converted into biogas. This process will then release energy, which can be used for your heating, electricity, or vehicle fuels.

 

5. Geothermal Energy

Geothermal is the last on this list and obtains energy from the ground, from just a few metres all the way to kilometres underground in the earth’s surface to transfer it into energy. This works because the earth’s surface creates steam, which is then used to spin turbines, and then the same process as wind energy occurs.

 

Benefits of Investing in Renewable Energy

There are many people and investors who make a strong case for investing in renewable energy, and here are some of the main advantages of renewable energy investment:

      1. Government support: As we move closer to a greener environment, the government has legal duties to try to push towards net zero. Therefore, more people will have to begin using renewable energy sources during the energy transition.
      2. It is proven to be good for our future: What we mean by that is that we know renewable energy is ethical and is going to change the world if more and more people get on board with helping combat climate change.
      3. It has the potential to boost the economy: This procedure and plan for the future can help create jobs and also lower fuel imports, meaning more people in the country involved can get jobs.
      4. As technology advances, only more solutions will arise: With advancements in technology being made every day, there are going to be additional technologies that we can use to boost the use of renewable energy.

 

Should I Invest in Renewable Energy?

Whether you should invest in renewable energy depends on two main factors. If you’re investing in clean technologies to make money, picking individual stocks will be difficult to do as the market will be extremely volatile. However, if you’re just investing in global energy to contribute towards a cleaner future and it aligns with your values, then it can be a great investment.

Policy, the global economy, and local regulations are also massive reasons why this is a good investment. First of all, if policies are changing and constantly affecting green companies around the world, this may negatively impact your investments.

The same goes for local regulations, as these may change or be updated, which causes the renewable energy movement to slow down and ultimately hinders your investment.

Lastly, if the global economy isn’t performing well, then the budget for renewable energy plans and the prices of stocks will drastically decrease. However, on the flip side, if global investments are soaring, the prices will go up – thus, your faith in the global economy will be the deciding factor in whether or not this is a good investment for you or not.

Overall, it depends on your values, and what you’re investing in renewable resources for, so it is important to conduct extensive research before investing in renewable energy.

 

How to Invest in Renewable Energy

There are three ways in total that you can invest in renewable energy and we’ll run through them here:

 

1. Investing Directly into a Renewable Energy Project

If you see a project near you or somewhere where you’re interested in investing your money in a project, you can directly get in touch and ask to invest in their project. However, because this is just a singular project, tying all of your money into one project creates great risk, especially if the project fails.

Important Note: If you’re going to go this route, make sure that the firm you invest in is regulated by the Financial Conduct Authority (FCA).

 

2. Investing in a Stock

You can search for renewable energy projects and companies and invest in singular companies through the stock market.

However, similarly to the last one, investing in single companies can be extremely volatile, especially if the project fails. If you’re going to invest in single stocks, you must ensure you have a diversified portfolio elsewhere to spread the risk of your cash.

 

3. Investing in an ETF (Exchange-Traded Fund)

This would be our go-to way to invest in the renewable energy sector if you want the lowest risk and a diversified bunch of renewable energy companies in your portfolio. In this example, an ETF allows you to invest in a basket of companies within the renewable world energy sector.

This doesn’t mean there’s no risk involved, but if you believe in the sector as a whole, there’s a greater chance of success with lots of companies rather than relying on one stock.

 

What Does the Future Look Like?

Although investment in clean energy has become more mainstream and more people understand the importance of clean energy, there is still room for this sector to grow long-term.

However, ultimately, no one can predict whether this sector will perform or not perform in years to come from an investment perspective. Yet, for the plans to meet the targets of Net Zero by 2050, investment in the sector is paramount, meaning that people will have to continue to invest.

Whether you invest in it depends on a number of factors, so we always recommend you consult with a financial expert and look at all your options before making a final investment decision.

Are you searching for investments which outperform bank interest rates?​

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