Renewable energy is growing much faster than anyone predicted. Last year, the International Energy Agency (IEA) increased its global renewable energy growth projections1 by nearly 30% over the previous year’s predictions. Several policies and geopolitical events are thought to have spurred this acceleration, particularly in the US, EU, China, and India.
In the US, the Biden administration passed three key pieces of legislation2 in its first two years, encouraging renewable energy growth to exceed expectations. The bipartisan infrastructure bill, the CHIPS and Science Act, and particularly the Inflation Reduction Act have incentivized over $230 billion in manufacturing investment2 so far. These policies prompted IEA to increase the US projections for renewables by 26%1. The US installed nearly 50% more solar2 in Q1 of 2023 than in Q1 of 2022 and is likely to derive 23% of electricity2 from renewables by the end of this year.
The electrical vehicle market is included in these projections and is the fastest growing sector2 in the automotive industry. Many carmakers have committed to ending the production of internal combustion engine vehicles, with General Motors pledging to end conventional car sales by 20353. Recognizing that the unavailability of charging stations is a major barrier to growth, seven major carmakers2 are collectively investing $1 billion in new charging stations across the US and Canada.
For the European Union, the Russian invasion of Ukraine in early 2022 highlighted a severe energy security problem for EU countries that had been so reliant on Russian oil, prompting a rapid shift to renewables. This in part led the EU to pass the REPowerEU plan4 in May 2022, which aims to wean the bloc off of Russian fossil fuels by 2027 and increase the share of renewables in total energy consumption to 45% by 2030. Currently, one-third of electricity2 comes from wind, solar, and hydropower in Britain while in May of this year wind and solar officially generated more electricity than fossil fuels2 in the entire EU.
In China, the 14th Five Year Plan5 was released in 2021 and included aggressive renewable energy targets. Even as the world’s leading producer of wind and solar electricity, China is projected to double its renewable energy capacity2 by 2025, five years ahead of schedule. Meanwhile, India has rapidly expanded its production of solar panels, with new installations projected to double between 2022 and 2027.
The IEA report1 has made it clear that the trend of renewables exceeding expectations is global, with every region accelerating renewables faster than projections. Since 20092, the cost of solar has dropped by 83%, wind by roughly 50%, and lithium-ion batteries by 97%. Meanwhile, the cost of nuclear, oil, and gas has remained steady or increased. Solar and wind now generate 12% of global electricity2, with renewables projected to surpass coal as the largest source of electricity in the world by 2025 — that’s two years from now.
We believe there may be no better time than the present to start investing in the renewable energy sector. Those who do could be joining an upward global trend: By the end of this year, investment in solar2 is expected to exceed that for oil for the first time in history while investment in clean energy more broadly is expected to exceed investment in fossil fuels by $700 billion2. The TrueShares Eagle Global Renewable Energy Income ETF (RNWZ) seeks to capitalize on this trend by investing in renewables infrastructure companies that offer core renewables exposure and long-term capital growth potential.
- https://www.iea.org/reports/renewables-2022/executive-summary
- https://www.nytimes.com/interactive/2023/08/12/climate/clean-energy-us-fossil-fuels.html
- https://www.cbsnews.com/news/auto-industry-future-electric-will-mechanics-be-out-of-work/
- https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/repowereu-affordable-secure-and-sustainable-energy-europe_en
- https://www.undp.org/china/publications/issue-brief-chinas-14th-five-year-plan
Associated Risk of Investing in Renewable Infrastructure Companies. Because the Fund invests in Renewable infrastructure Companies, the value of Fund shares may be affected by events that adversely affect companies in that industry. These can include contract counterparty defaults, adverse political and regulatory changes, poor weather conditions for renewable power generation, falling power prices, losses on financial hedges, technological obsolescence, competition and general economic conditions.
Forecasts are inherently limited and should not be relied upon when making investment decisions. There is no guarantee the projected growth will occur. In addition, substantial industry growth does not guarantee positive investment returns and may lead to significant volatility.
