Council Post: Investing In The Green Energy Transformation

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Luis Berruga, CEO of Global X ETFs

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World events over the last several years tell a long-term story that makes clear the risks of heavy oil dependence and accelerates the transition to net-zero carbon emissions in countries across the world. These risks are compounded by a growing awareness and scientific evidence that man-made climate change will significantly alter the environment of planet Earth for the worse. In other words, the green energy transformation has not only avoided a slowdown in the wake of the past few years of world events—it looks poised to speed up further.

Regarding nuclear power, the fact that it emits zero greenhouse gas emissions during operations has made it not only a useful energy option for net-zero climate aspirations but also possibly a necessary one. Nuclear power is highly dependable and, unlike other forms of renewable energy, does not rely on various climate conditions to power panels or turbines. Whether there is significant or little sunlight and whether the wind is blowing or not, nuclear power functions with the same level of efficiency.

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Reactor technology also continues to develop quickly. New reactor technology allows for designing to meet certain requirements for the end user. These can look like reduced water use and water wasting.

This new technology has begun to catch the attention of governments, and Asia is now positioning itself as a leader in new reactor construction. there are currently 19 traditional reactors under construction in China with several in progress in India as well as South Korea. While some countries such as Germany are ruling out extensions of their nuclear plants, they are proving to be the exception rather than the rule. According to Statista, there are more than 50 reactors under construction around the world. In contrastthere were only five reactors permanently shut down in 2021.

Further accelerating the shift toward renewables are advancements in both wind and solar power, driving affordability and efficiency. Between 2010 and 2020, onshore wind installment costs fell by 31% and wind capacity grew by over three times. During that same period, the cost of installing solar photovoltaics (PV)—which converts light into electricity—fell by 81% as the cost of PV cells declined dramatically.

This drop in cost generated widespread adoption, helping solar PV capacity surge 18 times between 2010 and 2020. At the same time as these costs are declining, electrification—expanding infrastructure to enable more rapid adoption of renewables—is growing. From energy storage to smart grids, new technology is bringing the United States closer to achieving nearly half electric energy use by 2050, the estimated requirement to achieve its net zero-emission targets.

In fact, global renewable electricity generation grew at eight times the growth rate of traditionally generated electricity in the past decade, significantly expanding renewables’ share of global electricity. This rate of growth will need to accelerate in the coming decades to curb climate change and achieve a global net-zero. According to the International Energy Agency, approximately 88% of all energy production must be renewable by 2050 to limit global warming to 1.5 degrees Celsius. Both wind and solar power will play a leading role in ensuring that the target is reached.

For investors interested in capitalizing on this green energy transition, there are several options available. One could choose to invest directly in the downstream products powering this transition. This could include lithium batteries, which will enable automakers to reach their 40% to 50% electric vehicle fleet goals by 2030, or carbon capture technologies, which are expected to receive over $154 billion in annual global investments.

Investors could also look further upstream to the raw materials that go into the production of these products, such as hard rock minerals like brine for lithium batteries. Thematic investing, including through thematic-based ETFs, provides investors with exposure to these various sectors disrupting the economy and reshaping the world of tomorrow.

It is more clear today the urgency of the green energy transition. However, this clarity started well before the present day, and it is poised to shape the 21st century as countries diversify away from heavy reliance on oil. As climate change disrupts production and consumption patterns, drives food and water scarcity, and fuels mass migrations, governments and industries alike will increasingly turn to renewables—from nuclear to wind to solar power—to mitigate these effects. Climate change may be a man-made problem, but it also has man-made solutions, and the rapidly advancing efficiency of green energy technology is central to them.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.


Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?


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