We still rely on oil but it is not the only game in town anymore. In a prolonged low-point for the oil industry, focus has shifted to alternative forms of energy.
Imagine investing in Google before it became a verb. Would be nice, wouldn’t it? Well, it might still be possible – “We are talking about the world’s biggest (new) market. It puts laptops in the shade.”
What is this golden opportunity? Renewable energy. Perhaps slightly self-evident given the current decline in fortunes of the oil industry but very worthy of consideration.
“The renewable energy market is going to be by 2020 between $2 and $3 trillion a year,” says Sir David King, Britain’s special representative for climate change. According to a recent Reuters article, the long-term smart pension pots are divesting from oil and gas to this market, and the European Investment Bank, “whose loans underpin European Union policy, in January announced it lent record amounts for climate-related projects in 2015 and predicted the trend would continue.”
It’s clear why. With the lowest energy costs (onshore wind roughly 4 US c/kWH) the International Renewable Energy Agency says investment in 2015 soared. Growth, it predicts, will be realised. One example is Total’s move to commit $150m in a venture fund for renewable start- ups – already connecting with around twenty firms including at least solar power start-ups Powerhive and Off Grid Electric. (2nd big pitch of the day: the Chief Executive Patrick Pouyanne said, “Their systems are expected to speed up electrification in Africa and could be as much a game changer as mobile phones were in their field.”)
The numbers speak for themselves. While global stocks crashed as oil prices hit $27pb, renewables like solar and wind raked in a record $329.3bn of investment last year. In contrast hundreds of billions of dollars in investment has been delayed by oil companies fearing the prices will sink further. “These figures are a stunning riposte to all those who expected clean energy investment to stall on falling oil and gas prices,” said Michael Liebreich, founder of the London-based research arm of Bloomberg LP. “They highlight the improving cost-competitiveness of solar and wind power.”
Another interesting angle is the surge in development in countries like China and India, Chile and South Africa. Beijing has increased investment by 17% to $110bn – double the $56bn invested by the US. Surprisingly despite the Prime Minister’s faltering support for renewable incentives, the UK was Europe’s strongest market.
It’s a fashionable term – divestment, but does it have longer staying power than the man braid? The PR benefits are clear – just think of Leonardo di Caprio and #go100percent. But it’s also economically smart too. Advisor Partners reported between 2014 – 2015 NYC’s biggest pension fund lost $135m because of fossil fuel holdings. In Australia, 15 of the top funds there lost on average $5.6bn through fossil fuel investments. Only in India does coal hold its price. (3RD big pitch of the day: a year ago, a solar project in Dubai went online, and offered electricity at a rate of $0.058 per KwH. Leibreich said, “This was the solar equivalent of the shot that was heard around the world.”)
We should leave the final word to UN secretary general Ban KI-Moon. He said, following the COP21 summit, that investors and corporations are now acutely aware of the benefits of renewable energy. “It marks the beginning of the end of growth built solely on fossil fuel consumption. The once unthinkable has now become unstoppable.”