Thinking of investing in renewables?
Does it make sense to invest in this sector, and what are the advantages?
Did you watch the sunrise this morning? Here’s some interesting facts:
- Every 88 minutes, 470 exajoules of energy from the sun hits Earth’s surface. That is as much energy our planet consumes in one entire year.
- Every 112 hours, which is around 4.6 days, the sun provides us with 36 zettajoules of energy. That’s as much energy as is contained in all proven reserves of oil, coal, and other natural resources on our planet.
Yet today, only around 1% of total global electricity comes from solar power.
In 1977, the cost per watt to use solar power energy was $76.67. Even in 2003, it was believed that the cost of solar power would never get below $1 per watt due to the cost of the raw materials required to manufacture solar panels.
Today, however, solar power sits at around 0.10 to 0.30 per watt – depending on the manufacture and location. In Chile a few weeks ago, they just set a new solar price record of $0.0291 pWh.
To put all these facts into perspective, consider other fuel sources such as natural gas, which sits at around 0.07 cents per watt, while coal sits at 0.13 per watt. So it would be fair to say that traditional resources are under threat –possibly even headed towards extinction.
When it comes to technological development, most people think of a linear model extrapolating this line into the future, or a rate of curve. For example, take 1, 2, 3, 4 … You would expect the next number to be 5. The reality is that in some aspects of technology and manufacturing, the development can be exponential. Consider the miscalculation of the projected cost of solar – out by 142%!
When you think about the renewable energy sector, solar has two powerful advantages that are not applicable to other sources:
- Sunshine is abundant worldwide, although ironically the poorest countries on Earth are often the sunniest places.
- Solar has the ability to equalise the energy market from country to country and township to township.
What does this mean? Hopefully, solar has the potential to reduce the overall cost of energy and living costs in the long term.
So what are the opportunities for you, the investor? Where can you invest in solar or renewable energy listed companies within the Australian marketplace? At this stage the list is very small, but here are some you might consider:
- Meridian Energy
- Infigen Energy
In comparison to the global markets, these Australian companies are fairly small and their journey on the development curve is still early in the business lifecycle.
If you don’t feel confident to pick and choose your investment options, you might prefer to consider an ethical or sustainable managed fund that might also have exposure to the renewables sector with other investments also pull together.
Please also remember that before embarking on any investment or strategic financial planning decisions, you should always seek professional guidance from a licensed financial planner – and of course we would recommend our team at AJ Financial Planning.