Renewable Energy Starting To Take Meaningful Share

  1. Renewable energy is growing as a percent of total consumption. 
  2. What does renewable energy include?
  3. While growing, the investment implications are maybe less clear.

The growth of renewable energy, specifically wind and solar energy, has been on a steady rise as a viable alternative to traditional fossil fuel-based energy sources.

However, as investors, it’s always important to consider the long path that led to this point. Like many major advancements, the breakthrough moment may appear sudden, but it is the result of decades of research and development.

solar and wind share of total energy sector market world chart

Today, wind and solar energy make up 5.7% of total energy consumption, which is almost five times the level in 2010. This clear trajectory demonstrates the growing significance of renewable energy in our energy mix.

For the purpose of rounding out this data review, it is probably important to understand renewable energy at a basic level. Renewable energy comes from natural sources that keep replenishing themselves, like the sun, wind, water, geothermal heat, and plants. As an example, wind turbines are used to make electricity from wind, while solar panels capture sunlight to create power. Water dams (hydroelectric dams) use the force of moving water to produce energy, and geothermal energy is made by tapping into the heat below the Earth’s surface. 

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From an investment perspective, like any other commodity, renewables are subject to volatile supply and demand dynamics. Making the underlying commodity less interesting despite the rate of growth taking place. Like anything else, we are looking for sustainable businesses models where cash flow generation is clear, a competitive advantage is built, and current valuations make sense.

Twitter:  @_SeanDavid

The author or his firm have positions in the mentioned companies and underlying securities at the time of publication. This is not a recommendation to buy or sell securities. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.