Renewable energy: an expanding investment market?
Dec 18, 2023
Renewable Energy: An Expanding Investment Market
The climate emergency and the need to reduce greenhouse gas emissions have propelled renewable energy to the forefront of global discussions. Let's explore why the renewable energy market, once considered an ecological niche, is transforming into a major economic sector on a global scale.
The Climate Emergency: The 21st Century Challenge
Since the 19th century, human hyper-industrialization has plunged our planet into a climate emergency that can no longer be ignored. Human activity has caused major and abrupt environmental transformations, leading to climate disruptions whose repercussions are already being observed on biodiversity.
One of the main causes is the excessive emission of greenhouse gases (especially CO2). These gases form a bell around our planet and help to retain some of the sun's rays, the main result of which is a general increase in temperature on earth.
According to data from the United Nations World Resources Institute, the main contributors are the road transport sector, deforestation, the consumption of residential and tertiary buildings, manufacturing industries, the oil and gas industries, and livestock farming.
According to the latest IPCC report, the earth's surface temperature has risen by 1.1°C compared to the pre-industrial period. This figure is likely to reach 1.5°C by 2030. The most pessimistic scenario, corresponding to an increase in emissions at the current rate, predicts a rise of 5°C by 2100. For comparison, the famous Ice Age we experienced 20,000 years ago corresponds to a decrease of 6°C from the current average temperature!
In recent years, more and more countries around the world are aware of the urgency to act. Limiting this warming to between 1.5°C and 2°C will only be possible by accelerating and deepening the reduction of emissions now. Since 2017, greenhouse gas emissions in France have already decreased by 9.6%, and the stated ambition is clear: to achieve carbon neutrality by 2050.
Renewable Energies Facing Climate Challenges
While it has been a driver of progress and development, the world's economic and industrial growth for over a century has also been accompanied by an ever-increasing need for energy.
Historically, this rise in electricity demand has been met by CO2-emitting energy sources, such as fossil fuels – coal, oil, and natural gas. These energy sources are favored for their availability and relatively low cost, but they have a considerable environmental impact in terms of greenhouse gas emissions.
This is why France and Europe are accelerating their transitions to more virtuous energy sources, that is, those whose production does not generate too much greenhouse gas emission. Here is a summary table from the Ademe on the CO2 emissions of different energy sources:
The carbon intensity of electric generation, gCO2/kWh (gram-equivalent of CO2 per kWh of energy produced)
Logically, coal-fired power plants are at the top of the list of the most polluting energy sources. On the other hand, we find hydroelectric power plants, whose CO2 emission is almost nil.
These observations highlight the need for a transition to cleaner and renewable energy sources to support sustainable growth. This is a finding shared by COP28, an international conference of the United Nations, whose final agreement between the representatives of the 197 States was described as historic for the future of the energy transition.
Photo of the representatives of the 197 States present at COP28
After officially recognizing for the first time that all fossil fuels (oil, natural gas, and coal) are the source of the majority of global greenhouse gas emissions, the report calls on countries around the world to "transition away from fossil fuels in energy systems in a fair, orderly, and equitable manner".
Most importantly, by 2030, a hundred countries have committed to tripling their renewable energy production capacities. Although some bad players are not on this list, it includes the main countries of Europe. In other words, renewable energies are already occupying more and more space in the European energy landscape by 2030.
The Booming Green Energy Market
In order to address the climate emergency mentioned above, states are choosing to abandon fossil fuels for a transition to other, more "green" sources, notably wind and solar. To achieve carbon neutrality goals, significant investments are expected in the coming years.
The Boston Consulting Group recently published a forecast study estimating the opportunities of this market at $27 trillion by 2040. The main spending sector is undoubtedly renewable energy production equipment (wind turbines, solar modules, etc.) whose global market is estimated at $9 trillion over the same time horizon. In these estimates, about 20% of the global market, or 1.8 trillion dollars, is attributed to Europe.
Given the magnitude of the challenge we face, the investments of the private sector aiming to decarbonize their activities will not be enough to complete the financial commitments made by various countries around the world. This is why initiatives are emerging to open up and democratize access to investment in the green energy sector for everyone.
This is particularly the case with Dowgo, whose platform aims to offer a new investment vehicle through the tokenization of assets on the blockchain. This allows producers to finance themselves while sharing a part of their future energy production with investors. The entry ticket is lowered to 1 euro, allowing more individuals to invest in this rapidly expanding sector while directly and tangibly contributing to the emerging energy transition.