Investment outlook

Renewable energy investment as an alternative to fossil fuels investment gained wider acceptance over the past few years. This was due to the worldwide growing awareness that because of the strong increase in extreme weather events and the resulting strong demand for power, the stability of the power system could be at stake. This trend was reinforced by rapidly falling generation costs. Global investment in solar, wind and other renewable energy installations increased by 17% to USD 270.2 billion in 2013/14 and led total capacity to top the 100-GWh mark.

However, growth of the production capacity of renewable energy started from a low level. The gains are only a fraction of the change needed to keep global warming limited to the –internationally set target of 2%. The European Union’s targets of 20% renewable energy by 2020 and 27% by 2030 are still very far away from the current average of 5% to 10% of total energy supply. Whether the necessary change will be accomplished, strongly depends on moral, political and financial commitment.

With investment in solar, wind and other renewable energy installations picking up again globally, the investment level in 2014 of USD 270.2 billion approached the 2011 record level of USD 278.8 billion. Given that the capex for renewable energy has come down, the added capacity has grown significantly in 2014. Of all newly built energy plants, 50% produce renewable energy. If the share of renewable energy continues in this pace, growth of the world economy will not necessarily mean that the emission of CO₂ automatically increases too, as is the case until now. The economic rationale behind investing in the sector is strong as well as it provides over 7.7 million jobs and attracts solid funding from all sorts of investors.

The outlook for renewable energy is favourable and the sector provides significant investment opportunities for a range of investors with varying risk profiles. Investing in renewable energy comes with many different considerations, with many different choices and with a broad array of market drivers. Investors of all sizes can find projects to invest in and thus help the transformation from fossil-based into a renewable-based economy. This is certainly not a sector where one should expect to make a quick profit. Above all, a strong commitment combined with a long-term investment horizon is required.

The increased level of professionalism of the stakeholders in the renewable energy sector, i.e. finance, legal and development, requires the expertise of committed Investing through these experienced partners allows investors to contribute to the energy transition. They will be rewarded with attractive financial and social/environmental returns and fulfil their fiduciary responsibility to a sustainable global development.

When a house is on fire, the immediate reaction is to rescue the family silver; only on second thought do we think of putting out the fire.
Anne Mieke van der Werf

Renewable energy

Article by Anne Mieke van der Werf
Article by Anne Mieke van der Werf

Triodos Bank has been financing renewable energy for more than 25 years and is a partner of first choice for a relative large amount of developers and investors in the renewable energy sector. Triodos Bank considers energy to be a basic human need and therefore something that we need to ensure is being generated and used on a sustainable basis for future generations.

For an overview of our activities in energy and climate, please visit the Energy and Climate investment strategy page