The Economic and Social arguments for Renewable Energy

REthinking Energy, a new report from the International Renewable Energy Agency (IRENA) has stated that an increase in the adoption of renewable energy technologies is the most feasible method in reducing carbon emissions and avoiding potentially catastrophic climate change.

The report concentrates on the global power sector and how technological advances, economic growth, and climate change are altering it. Also it draws on global research from the agency whilst reviewing progress in the transition to a sustainable energy future.

“A convergence of social, economic and environmental forces are transforming the global energy system as we know it. But if we continue on the path we are currently on and fuel our growing economies with outmoded ways of thinking and acting, we will not be able avoid the most serious impacts of climate change,” said IRENA Director-General Adnan Z. Amin, at the launch of the publication in Abu Dhabi.

Electricity demand is expected to more than double by 2030 as the global population is projected to reach 8 billion and many people move to a more energy dependent way of life. The burning of fossil fuels to generate electricity accounts for more than 40% of man-made CO2 emissions and as demand for electricity increases this will continue to increase.

“The good news is that renewable energy provides a viable and affordable solution to address climate change today,” Mr Amin added. “And while the outlook for renewable power is bright, we need to rethink the mechanisms which have, up to this point, brought renewables into the mainstream and prepare for the next stage of this global transformation.”

However demand is also changing as individuals and private and public institutions alike seek a cleaner, more diverse energy mix and renewable energy is seen as long term solution to this new energy requirement.

Renewable Energy sources including bioenergy, geothermal energy, hydropower, ocean, solar and wind energy are proven in producing energy with up to 250 times less carbon emissions than coal and 120 time less than natural gas, the cleanest of the fossil fuels.

All of this is great news as the latest Eurobarometer survey on the environment has shown no indication that Europeans’ concern about environmental issues has diminished in the three years since the survey was previously compiled.

The poll found that the majority of those surveyed share the view that the efficient use of natural resources (79%) and the protection of the environment (74%) can boost economic growth. While 80% consider that the economy influences their quality of life, 75% think the state of the environment has a similar impact and 77% of EU citizens believe that environmental problems have a direct effect on their daily lives.  They worry most about pollution as well as waste generation and the depletion of natural resources.

59 % believe that social and environmental factors should be as important as economic criteria in measuring progress in their country. In relation to the spending and investment of public authorities, 59% are of the opinion that the public authorities of their country should favour environmentally-friendly considerations over cost.

75% say they are ready to buy environmentally-friendly products, even if it means paying a little more. 93% think that big polluters should make good the environmental damage they cause, introducing heavier fines for offenders was deemed the most effective way of tackling environmental problems.

85% of Europeans believe they have a role to play in protecting the environment. Most are adopting environmentally-friendly actions and behaviour. Separation of waste for recycling (72%), cutting down energy consumption (52%) and cutting down water consumption (37%) were the three most common activities.

77% feel that big companies and industry are not doing enough to protect the environment; 70% think the same of their national government. 65% believe that citizens themselves could do more.

77% of EU citizens agree that European environmental legislation is necessary to protect the environment in their country and six out of ten think that environmental decisions should be taken jointly within the EU. 79% also think that the EU should be able to check that environmental laws are being applied correctly in their country. 84% want more EU funding to be allocated to supporting environmentally-friendly activities. In addition 56% want the EU to do even more to protect the environment.

Environment Commissioner Janez Potočnik said: “It is good to see such solid and widespread support for the protection of the environment, even in difficult times. People are particularly concerned about air and water pollution, chemicals and waste, and they feel that more must be done by everyone to protect the environment.”

As global energy demand continues to increase the desire of the people of Europe for it to come from clean renewable sources reflects the overall mood that the long term security of environment is of the utmost importance. Also at time when the relatively weak position of the world economy is meaning that many are seeing a reduction or stagnation in income they understand that the costs associated with changing their energy systems is a worthwhile long term investment.

The progress we have made already in producing new renewable energy solutions and sustaining the output is an achievement we can look upon with satisfaction. However with confidence in the industry from the public at an all-time high we must take this opportunity, push on and improve upon what we have already accomplished.  We are confident that if we continue to show the application and dedication we are capable of we can achieve our goal of producing 100% of our energy requirements from renewable sources and at the same time safeguard our environment for generations to come.

Renewable Energy Investments – An Alternative Pension Fund

At a time when the global economy is still struggling to produce the highs of the early part of the 21st century many are looking beyond regular pension plans and the investment opportunities they offer. It should be no surprise therefore that investing in renewable energy projects is becoming more popular as these are proving to show higher returns than the more traditional staples such as property.

After Energy Minister Greg Baker claimed that solar developments could deliver results better than a pension Renewable Energy company EvoEnergy compiled a report based on returns for different types of renewable energy projects and this research showed how these types of projects can produce a return on investment in double digits for private investors in their retirement.

They compared the estimated returns achievable over a twenty year period by investing £5,550 in either solar panels, renewable energy debentures, or a regular managed pension fund.

Domestic solar topped the results showing a return of over 10% for the lifetime of the feed-in-tariff (FiT) while after charges a typical pension fund would be expected to grow 6% year on year over the same period. An investment in a debenture style scheme for a renewable energy development can expect to earn 8% per year.

Although pensions come with the added benefit of tax relief the difference in returns shows that renewable energy projects a realistic option for long term pension style investments for those serious about diversifying their retirement portfolios.

Steve Wilks, director of finance at EvoEnergy, said: “Following the former Minister’s announcement in February, we set out to see for ourselves exactly how solar actually stacked up against a pension as an investment aimed specifically at delivering income before and after retirement.

“Mr Barker said returns of eight per cent or above could be achieved – what we found was that, with an average, unshaded 3kW array installed at a cost of £5,550 upfront, a homeowner could see returns of more than 10 per cent once the FiT, export tariff and possible energy savings are accounted for.

“That’s more than £600 per year before inflation with just a moderate 25% saving off energy bills accounted for. Figures like that, along with the falling cost of installations and the security offered by the 20-year FiT, show that solar can now be on everyone’s radar when they’re planning for the future. The fact that returns are both income tax free and available before 55 just makes them look even better.

“Investing in solar is by no means a direct replacement for traditional pension funds, in our opinion. However, what it does offer is a tax-efficient alternative for a lump sum that isn’t susceptible to market fluctuations that can deliver significant returns over the medium to long-term in addition to a pension.”

Pensions broker Hargreaves Lansdown echoed the view that diversity can offer benefits when it comes to retirement planning.

Tom McPhail, Head of pensions research at Hargreaves Lansdown, said: “Pension investors can and should take a long term view of investing; often they are in the unique position of being able to take a view over an investment horizon which stretches decades into the future.

“This means diversifying investment portfolios and taking advantage of some less conventional opportunities which might not be suitable for investors operating over shorter time spans.”

Along with solar, another such opportunity is through alternative Debenture investments with companies like Abundance Generation, which allows private investors with a lump sum to invest directly into larger renewable projects which support local communities.

Bruce Davis, managing director of Abundance Generation, said: “From our point of view, generating electricity from solar power offers homeowners a real choice when looking for a long term income generating investment in their retirement.

“Whether that’s through a domestic installation or through a Debenture that invests directly into other projects will very much depend on their own individual circumstances.

“With the government reforming annuities because of a lack of competition and poor value for retirees, advisers are starting to looking beyond conventional investments and considering a Debenture, which can provide an income that is less volatile and access to an uncorrelated asset.

“Each investment is individual and offers different returns; however Abundance targets projects which are estimated to produce an IRR of 7% of more. This would potentially provide investors with around 2.2 times their original investment although they should bear in mind that their capital is at risk and debentures are not readily realisable.”

At ILI Energy we are about medium wind and some of the returns on these types of developments top the 10% that solar can achieve. Admittedly the capital expenditure of these types of projects is much higher and not something the man in street will ordinarily get involved in on their own however it is no surprise to see community projects where several can get involved and share the cost as well as these excellent returns.