To develop renewable energy investments, research technologies, assess local conditions, create a business plan, and secure funding. Implement pilot projects, invest in infrastructure, and stay updated on industry trends and policies to ensure long-term success.
Renewable energy is derived from sources that are naturally replenished, and can therefore continue to generate electricity subject to natural conditions. It differs from sources of energy that are finite and will eventually run out, led by fossil fuels, which cannot be replenished once extracted.
Sources of renewable energy
There are two ways to invest in renewable energy: either by buying the equities or bonds of the electricity or utility companies supplying the energy, or of the companies making components for the equipment that is needed to create power. This can be done through strategies such as the Robeco Smart Energy and Smart Mobility strategy, which specifically target this sector.
There are five principal sources of renewable energy:
1. Hydroelectric power is the oldest form of renewable energy, dating back to pre-Roman times, when the water wheel was used to turn gears that could grind corn. It remains the most common renewable source, in use industrially since the 19th century. Water power is usually harnessed by dams across rivers. The world’s largest hydroelectric plan is the Three Gorges dam complex in China, which can generate 22.5 gigawatts of electricity – equivalent to 40 average-sized coal-fired power stations. However, they also come with concerns over environmental damage and human rights violations, and have been blamed for diverting river systems.
2. Wind power is harnessed by turbines that are mainly laid out in ‘wind farms’, comprising hundreds of machines – many of which are offshore. Some turbines are now the size of skyscrapers, while large-scale wind farms are capable of generating enough electricity to power entire cities. The world’s largest wind farm at Gansu in China has 7,000 turbines that can generate 20 gigawatts of electricity.
3. Solar power is captured by photovoltaic panels, which convert the sun’s rays into heat. They rely on light refraction, so they don’t necessarily need the sun to be shining brightly to work. The world’s largest solar park at Jodhpur in India is spread across 40 square kilometers and can generate 2.2 gigawatts of electricity.
4. Biomass power is generated by burning biological materials that are either living or decaying, led by wood, plant, forest residues and compost material. It is either burnt in power stations or converted into biofuels such as ethanol, which can power normal internal combustion engines. Some crops such as rapeseed are specifically grown as biofuels. Biomass is not considered as environmentally friendly as other renewable sources since its burning generates greenhouse gases. Many coal-fired plants such as the giant 4 gigawatt Drax complex in the UK are being converted to biomass in order to reduce emissions.
5. Geothermal power is harnessed from the Earth’s natural sources of heat, led by volcanic activity. It is the source of 30% of all electricity power in Iceland, which taps into thermal springs heated by molten rock lying thousands of meters below the surface. However, this form of renewable energy is restricted to areas with volcanic sources, and generates only about 14 gigawatts of power globally each year.
Developing investments in renewable energy sources is a crucial step towards a sustainable future. Here are some strategies to consider:
Government Incentives and Policies: Governments can play a significant role by providing subsidies, tax incentives, and grants to encourage investment in renewable energy projects. Policies that mandate a certain percentage of energy from renewable sources can also drive investment.
Public-Private Partnerships: Collaborations between government entities and private companies can help fund large-scale renewable energy projects. These partnerships can leverage the strengths of both sectors to achieve common goals.
Green Bonds: Issuing green bonds can attract investors interested in funding environmentally friendly projects. These bonds are specifically earmarked for projects that have positive environmental benefits.
Technological Innovation: Investing in research and development can lead to technological advancements that make renewable energy sources more efficient and cost-effective. This can attract more investors by improving the return on investment.
Education and Awareness: Raising awareness about the benefits of renewable energy can increase public support and demand for these projects. Educational campaigns can help inform potential investors about the long-term financial and environmental benefits.
Diversification of Investment Portfolios: Encouraging investors to diversify their portfolios to include renewable energy projects can reduce risk and increase the attractiveness of these investments.
International Cooperation: Collaborating with other countries can provide access to additional funding sources and share best practices. International organizations can also offer financial support and expertise.
Community Involvement: Engaging local communities in renewable energy projects can increase acceptance and support. Community-owned renewable energy projects can also provide direct financial benefits to residents.
Corporate Social Responsibility (CSR): Companies can invest in renewable energy as part of their CSR initiatives. This not only helps the environment but can also enhance the company's reputation and brand value.
Financial Instruments: Developing new financial instruments, such as renewable energy investment funds or exchange-traded funds (ETFs), can increase investors' opportunities to participate in the renewable energy market.