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Cashing in on the $US777.6 billion renewable energy sector

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$US777.6 billion.

That is the projected amount of revenue to be generated from renewable energy sources by 2019.

While that may seem a massive amount (and it is), that estimation is backed by major energy research bodies around the world. And it is based on previous year’s data which shows that in 2013, the renewable energy market totalled $US432.7 billion.

The compound annual growth rate is expected at about 10.3%, which is a healthy growth rate whichever way you look at it.

There is no doubt that from an investor’s point of view these statistics paint a strong growth picture for the renewable energy sector. It is also a fact that the renewable energy industry is now generating more support from many camps including businesses and governments.

Despite previous difficulties in setting renewable energy targets, many governments around the world have recognised the need for co-operation and a concerted effort to support this sector. All these factors are boosting the generation of renewable energy, coinciding with growing demand and consumption.

You only have to look at some of the huge renewable energy projects planned for the next few years to see where some of the opportunities may be. Here are just a few of those projects:

TuNur Solar Project – a giant solar park in Tunisia that can export electricity to parts of Europe including France, Italy and Malta. The planned mega-project can generate 4.5 Gigawatts (GW) of power and can alleviate Europe’s dependence on Russia and the Middle East for energy.

Asian Renewable Hub – an international consortium of energy companies that plans to export a massive amount of wind and solar energy from Australia to South East Asia. The hybrid power plant would comprise approximately 1200 wind turbines and 10 million solar panels with a total capacity of 6000 megawatts (MW). This amount of power will be enough to supply electricity to more than 7 million households.

Gansu Wind Farm Project – a giant wind farm in China that reflects the country’s ambition to be a global leader in renewable energy. While this will serve mostly Chinese energy users, the project, with an estimated cost of $US16 billion, is already considered the biggest wind farm in the world.

As an investor, it may prove challenging to participate in multi-billion dollar projects like these. This is because projects like these are funded mostly by institutional and wholesale investors.

But retail investors can also participate and take advantage of the growth in this sector by investing in companies directly involved in the renewable energy. Companies that generate/harvest, store or distribute renewable energy are the direct beneficiaries of the anticipated growth in the coming years.

Here are some of the areas you can explore if you want to invest in the renewable energy sector:

Electric vehicles – this is where Tesla is playing big and leading the push. And while Elon Musk’s high profile has helped generate the interest in his company, Tesla is not without competition.

Some of the recent companies who have thrown their hats in the electric vehicle market include Volkswagen, Jaguar, Nissan, Audi, Hyundai and Kia.

Battery (energy) storage – not surprisingly, Tesla is also a major player in the energy storage space, which is also generating a lot of interest as energy storage remains a crucial factor when it comes to renewable energy. In this segment, Tesla faces competition from the likes of Siemens (Germany), AES (US), LG Chem (South Korea), Sonnen (Germany), PowerVault (UK) and Panasonic (Japan).

According to its most recent report, the International Energy Agency (IEA) said renewable energy will represent the largest single source of electricity growth over the next five years. This will be driven by falling costs and aggressive expansion along with rising demand for and consumption of renewable energy.

Australia may not be at the forefront of renewable energy growth, but there are many investment opportunities (companies you can invest in) around the world that will give you access to this growth industry

Written by Alex Douglas

Alex Douglas

Alex Douglas is managing director of Monex Securities Australia, part of the Monex Group Inc.

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