Is Sustainable Energy a Good Investment?

The impact of humanity’s energy production on the environment has been a growing concern for many years now. Decades of news reports, TV shows and blockbuster movies have all warned of the potentially disastrous effects that we can expect in the coming future if we don’t change our ways. In recent years, the alarm has only increased, and people seem more concerned about the environment now than ever before. Environmental policies are being instituted at a prodigious rate, and new green technological solutions are being thought of every day. After witnessing such a dramatic shift towards the field of sustainable energy, you may be asking yourself a few questions, such as – Is it really a worthwhile investment? What are the pros and cons? And what is the best kind of sustainable energy to invest in Is Sustainable Energy a Good Investment?

If we take all the politics and emotions out of the issue and simply look at the figures, we find that investments in sustainable and/or renewable energies do not always provide the returns that one might hope for. 

We should point out, though, that the terminology here can be somewhat confusing. While most people immediately associate the phrase ‘sustainable energy’ with solar or wind power, it can actually include things like natural gas and nuclear power, both of which have a much more nuanced history of returns.  

Is Sustainable Energy a Good Investment?
Is Sustainable Energy a Good Investment?

In short, then, we can’t really figure out how profitable these investments are with such broad language. To really determine their feasibility, we need to look at each type of energy individually. 

What are the Different Types of Sustainable Energy available for Investment?

As mentioned, there are many different forms of sustainable energy, including less well-known ones such as geothermal and bioenergy. That said, the most common forms of sustainable energy that may form a part of your investment strategy include – 

  • Solar
  • Wind
  • Hydro
  • Natural Gas
  • Nuclear 

With so many different kinds of energy, how do we know which ones are worth investing in? 

Is it Worth Investing in Sustainable Energy?

It depends on the specific type of energy production that you intend to invest in. Specific forms of sustainable energy production have grown in popularity over the years while others have gradually lost favour. 

We would also need to compare this growth to the potential investment opportunities provided by other, less green fuel sources. 

For instance, let’s look at fossil fuels strictly in South Africa. While there may be a global push for cleaner energy sources, South Africans are still concerned with Eskom’s ability to keep the lights on. 

As a result, the nation may be too preoccupied with tackling load shedding in the coming years and stabilising our current system, to effectively begin a notable shift towards other energy investments, thus hampering a lot of growth in the way of wind farms, hydroelectric dams, etc. 

That said, growing rates of climate change concern could tilt the scales in the opposite direction and nudge companies towards more eco-friendly options. 

While reports differ, there is some evidence to suggest that returns on investments within the sustainable energy market could become more and more viable as time goes on.

In short, investing in sustainable energies could be profitable, but you’ll probably make a lot more money off of something like natural gas than you will off of geothermal energy, so choose wisely. 

Is Sustainable Energy a Good Investment?
Is Sustainable Energy a Good Investment?

What are the Benefits of Investing in Sustainable Energy?

When discussing the pros and cons of sustainable energy investments, many people start talking about things from a moral standpoint. They often believe that the best reason to invest in these industries is that you’ll be helping to save the planet. While this may provide a rather large incentive to some, it’s also important to discuss the purely financial benefits of such a venture. 

Advantages of Sustainable Energy Investments 

Growth – Not only has the renewable energy sector been growing in recent decades, but it’s also actually expected to ramp up even more in the next few years. As more and more people become increasingly concerned with the effects of climate change, it’s likely that this rate of growth will only continue. 

Opportunities – The technological innovations within the fields of sustainable energy sources are far more dynamic than those in their more-traditional counterparts. This presents a wealth of investment opportunities for potential investors around the world. 

Incentive – Recent global trends have caused various countries to question their dependency on fossil fuels. This trend provides a good incentive for investments in alternative energy sources. 

What are the Problems with Investing in Sustainable Energy?

It’s not all sunshine and rainbows, though. As with everything in life, sustainable energy investments also have a few downsides that need to be addressed before you make any large commitments. 

Disadvantages of Sustainable Energy Investments

Returns – As mentioned, returns on investment in the sustainable energy sector are not always that great. While growth in the field may eventually remedy this issue, it remains a problem for investors in the here and now. 

Viability – A big problem with sustainable energy investment is the gap between innovation, commercialisation and scaling. Put simply, new and game-changing technologies don’t always translate well into the market. Someone may invent something hugely impressive and worthwhile in a lab, but that doesn’t necessarily mean that it’s going to provide a huge investment opportunity when applied in the real world. 

Competition – No matter how fast the sustainable energy market grows, it still needs to compete with the juggernaut that is the fossil fuel industry. This creates a huge issue for starry-eyed investors as the burgeoning technology essentially needs to fight off one of the largest industries on the planet. 

What is the Best Sustainable Energy to Invest in?

Given the current global climate, you’ll be hard-pressed to find a sustainable energy source that has experienced as much recent growth as natural gas.

That said, this investment option does seem far more volatile than the others, and risk-averse investors may want to consider wind and solar as potential alternatives. 

Likewise, the national policy can have a massive impact on the feasibility of investment as countries shift back and forth over their environmental responses. That said, it is worth remembering that energy sources such as natural gas usually fit into the rubric of ‘sustainable energy’, which could provide a highly profitable option for interested investors. 

Technological innovations could also have a major effect, however, these changes do not always translate into commercial applications and scalable solutions. 

Is Sustainable Energy a Good Investment?
Is Sustainable Energy a Good Investment?

In Conclusion – Is Sustainable Energy a Worthwhile Investment?

When looking at the raw numbers, it would seem as though there are many alternative investments that are far more lucrative than those involving sustainable energy. That is not to say that these investments are inherently bad, or dangerous, but it is important to acknowledge that returns could be higher if capital is placed in other areas. 

Perhaps the greatest pull for sustainable energy investments is their growth rate over time. While you may find better options elsewhere, the general idea here is that sustainable energy is the way of the future and will eventually outpace the alternatives. 

In other words, sustainable energy is more of a long-term investment that is expected to flourish as the years go by, rather than a get-rich-quick type of scheme that can be taken advantage of in the near future. 

It is also important to note that the viability of stable returns in this sector will depend heavily on the context of your investment. Certain countries have put far more time and effort into switching to sustainable energy sources than others, and, in many circumstances, it remains a luxury of the wealthier nations. 

Perhaps the biggest downside to investing in sustainable energy, is that it has some major competition in the form of fossil fuels. Despite the recent growth and innovation, sustainable energy sources are still far below the financial level of things like coal and oil, which continue to dominate the marketplace. 

All in all, sustainable energy may be the best possible step forward for humanity as a whole, and it may also represent the future of energy production across the world, but, currently, it isn’t exactly the strongest investment you could make.

Disclaimer Finance101: All of our posts are for research purposes only. Finance 101 aims to assist its readers with useful information on the laws of our country that can guide you to make financial decisions that will enable you to become more financially independent in the future. Although our posts cite the constitution in many instances, they are intended to assist readers who are looking to expand their knowledge of the law & finance-related queries. Should you require specific legal/financial advice we advise you to get in touch with a qualified financial expert.

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