Why renewable energy private equity matters todaySeptember 30, 2016
Why renewable energy private equity matters today
In the wake of India reaching its goal of turning into a Solar energy superpower. There is a lot put on the table to achieve that goal. Reduction of the risks of climate change requires urgent action now. In specific, the actions that help speed up the no/low carbon transmissions. The mankind has understood the importance of clean energy. Thus, a constant strive towards a growth of greener future is the need of the hour. The growth that can fuel a future of opportunity and prosperity for every person on the planet. Also, for the ones that will inhabit in the times to come. Such growth is possible with a strong impetus from a renewable energy private equity fund.
Role of Renewable Energy Private Equity
The mission to achieve this requires strong money power. That is how a solid trend towards increased development of renewables will happen. This calls for a mindset to uplift renewable energy from its erstwhile tag of a mere niche sector. The World bank has pledged to grant Indian government 1 billion USD for the same. For the records, this was the biggest amount towards the funding of Solar to any nation ever. Moreover, India is a developing nation. This fact alone hints towards the strong development of a funding pattern.
This funding boosts the incremental production of renewable energy resources on a global scale. Although the amount may be too small to make a significant difference to the entire world. It is encouraging to note that the wave to bring renewables to mainstream projects has begun. If only the energy private equity firms could follow suit.
Renewable energy private equity trends
When we see the trends in a holistic perspective. The facts are promising. Few of them that further prove huge potential for private equity energy funds are as below:
1. The highest amount invested in renewable energy projects ever is 285.9 Billion USD. The earlier high was 278.5 Billion dollars. The former figure is for the year 2015. While latter was in 2011. A notable factor is that the figures do not include large-scale hydroelectric projects. This indicates a clear rise in the investment activity in the renewables sector.
2. The WPI for the fossil fuels saw a steep fall last year. Though that did not hinder the lure of renewables in lieu of coal/ oil/ gas.
3. The investments made to renewable sectors of energy generation surpassed that of non-renewables. 265.8 billion USD to renewables is a clear winner to 130 billion USD to coal and gas.
4. It is interesting to note that despite bigger investments. The actual power generation by the renewables was 10% of entire global energy production. That is too small a contribution.
5. In 2015, the renewables represented 118GW of energy. This shows a huge jump from the 2014’s figure of 94GW.
6. But due to the energy produced by renewables last year. There were about 1.5 gigatonnes of CO2 not emitted to the environment. If a mere 10% contribution of renewables prevents a significant amount of damage. Then, the hazard reduction possibilities due to increments in that percentage are endless.
7. The year 2015 was the breakthrough year for the renewables sector. The year saw United Nations climate change conference in Paris, called COP21. 195 countries in the conference agreed upon zero net emissions. This shows the collective measure taken by nations towards the cleaner future.
8. Moreover, there was a shift in the trends of investment in the private equity solar
sector. Erstwhile the developed nations carried the bandwagon of investments in billion USDs. Now the shift is towards the developing countries. India, South Africa, Mexico and Chile increased their investments last year. Many countries invested more than 500 million dollars as well. Those included Morocco, Uruguay, Philippines, and Honduras.
9. In the current scenario, the investments in the sector promise better returns on equity. The reason for the same is the reduction in prices of solar photovoltaics. This brings the efficient use of capital from renewable energy private equity firms.
10. There is an increment in the usage of battery storage for power through renewables. This fact alone serves a huge push to the sector. Off-grid projects are common to developing nations. Thus, financing them brings in successful results with storage options in place. Storage is a sub-sector in renewables that private equity energy investments cannot ignore. Its sheer mammoth size is too large to ignore.
In Conclusion :