Is it a Good Time to Invest in Renewable Energy?

This is not financial advice. Your capital is at risk with any type of investment; profits may be subject to tax; and the value of any investment could fall.

While the majority of the world relies on the fossil fuel grid, renewable energy is growing at a rapid pace. Between solar panels, hydropower, wind turbines, and renewable heating systems, there are numerous options available to the modern consumer or energy provider. Let’s briefly look at how these industries are doing in the present moment.

Note: This is not investment advice. The purpose of this article is to relay objective information and recent news so readers can make their own choices.

Domestic Energy Generation is Cheaper Than Ever

Let’s first go over whether you should personally invest in installing renewable energy generation for your home. 

Prices for renewables are not just at an all-time low, there are grants in many different countries that can help you obtain them even cheaper. Similarly, some of these government schemes can help you make money back as well. 

The ECO4 scheme can give you an allowance of £7,500 for solar installations. Similarly, investing in solar and sustainable technologies will have  0% VAT till April 2027, so it is a good time to buy many of these items. Recently, they even extended the 0% VAT plan to solar batteries, making them a viable storage option for the average household.

On top of that, the Smart Export Guarantee makes it possible to generate an income from any excess renewable energy you generate, with rates as high as 14p (0.14 British pounds) per kWh. This rate will depend on your energy provider so check with them to see what prices they work with. This applies to solar panels, wind, and hydropower.

If you’re looking to buy solar panels and wondering what size solar system do I need to power a home, the answer can depend on your energy consumption. Assuming the average home in the UK consumes 2,500kW to 4,000kW, you will most likely be fine with a 3kW to 4kW system, which can cost around £6,000 to £8,000.

Similarly, heat pumps are still expensive but many grants can put them at the same price point as an A-rated boiler. Grants are available all over the US, UK, and Australia, allowing consumers to make the most of their money. Heat pumps also allow for massive savings on operational costs (under the right conditions, such as having a well-insulated home).

A report by the International Renewable Energy Agency(IRENA) shows that renewable energy costs kept dropping in 2021 despite some economic challenges. Solar, wind, and onshore wind electricity all became cheaper compared to 2020. This trend makes renewables a more attractive option to fossil fuels, especially considering high fossil fuel prices in 2022. 

IRENA estimates that 2021 renewable energy additions saved around $55 billion on global energy costs this year. The report highlights the importance of renewables in fighting climate change and achieving net zero goals.

Renewable Stocks Soaring

The stock market has also been edging more towards favouring renewables. Solar panel companies are performing well and the abundance of supporting policies has given many companies a boost. However, there are conditions where share prices can become more volatile as well.

The price of many renewable energy stocks has skyrocketed in the past year. Some stocks, like Inox Wind Energy and KPI Green Energy, have seen huge gains of 450-500%. Even less dramatic increases are still impressive, with companies like SRM Energy up 200-350%. Overall, more than 15 renewable energy stocks have jumped over 100% in the last year.

It’s important to understand why these stocks are rising. This comes on the heels of numerous countries setting ambitious targets for sustainability and net zero emissions. Most notably, India set its sights on a 2070 net zero plan and a 50% decrease in fossil fuel usage by 2030, requiring a massive investment in renewable energy.

According to analysts, stock prices rise whenever there is an announcement of this sort. Investment in solar has produced a slate of policies that create interest in renewables and allow companies to raise their prospects.

Conversely, stocks can dip when companies are failing to meet their targets or abandon them. Such trends indicate that this decreases faith in the future potential of many companies to survive on their own. That’s why it’s important to keep an eye on what countries are promising and what governments can deliver on.

Oversupply Might be an Issue

While the state of renewable energy is better than it has ever been at the moment, there are issues the industry is facing. Solar panels are said to be in a state of oversupply which is depressing prices. This has been attributed to Chinese companies jumping into the market to crowd out the competition.

To remedy this situation, governments may propose tariffs or other measures to even the playing field. This could cause prices to rise soon but, that is more of a speculative statement. Currently, many different companies are relying on low prices to gain a foothold and keep consumers happy.

Prices may rise eventually if production is decreased or imports are affected. It remains to be seen when such a market shift might occur.