Developments, opportunities and the impact of climate change on renewable energy production
• While renewable energy currently only plays a minor role in the total energy production of developed countries, its share is forecast to grow to 40% of global power supply by 2040. Solar photovoltaic (PV) energy is likely to dominate this growth in renewable energy, outpacing wind energy capacity growth by a factor of two or more.
• The main driver of this growth in renewable energy is the exponential decline in the production and installation costs for renewable energy. Already today, onshore wind energy is competitive with fossil fuels without government subsidies. Solar PV as an energy source will become cheaper than fossil fuel-driven energy production in the absence of government subsidies over the next few years.
• While renewable energy sources reduce the emission of greenhouse gases, climate change is going to affect the effectiveness of renewable energy in different ways. Recent academic studies show that wind energy efficiency might decline in Europe, Japan and Central US due to climate change effects, while the southern hemisphere might see increased wind energy efficiency.
• The efficiency of solar PV, on the other hand, is likely to increase in the UK and Central Europe due to climate change effects, and solar thermal power generation is going to be one of the biggest beneficiaries of climate change effects. Investors should keep these effects in mind when deciding on the form of renewable energy in which to invest.
• Solar PV is a currently under-appreciated and under-invested source of renewable energy. The amount of investment needed in the coming years in solar PV is significantly higher than the amount needed for onshore or offshore wind. Yet, investors continue to focus their investments on wind rather than solar PV. This creates imbalances in the supply and demand of capital for wind and solar that make solar PV investments relatively more attractive going forward.
• Additional investment opportunities exist in the relevant supporting infrastructure, such as batteries and energy storage systems, that will be increasingly important as renewable energy becomes the dominant form of electricity production.
To view the full report click here
This communication contains written material that is generic in nature and not related to a specific financial instrument. It is not personalised to reflect the circumstances of an individual client and therefore does not amount to a personal recommendation to any person. It does not contain any substantive analysis and does not and is not intended to recommend or suggest any investment strategy or opinion as to the future value or price of financial instruments of any kind. This communication is also made openly available at the same time to any investment firms wishing to receive it or to the general public on this ("Fidante Partners") website www.fidante.com. Recipients of this communication based in the EEA who are subject to regulation under MiFID should note that while they must make their own determination Fidante Partners Europe Limited ("Fidante Partners") is of the view that this communication constitutes a “minor non-monetary benefit”.