Why You Should Invest In Green Energy Right Now

By Aaron Levitt on July 08, 2014 A A A

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It's no secret that the global energy demand continues to rise. Driven by emerging
economies and non-OECD nations, total worldwide energy usage is expected to grow by
nearly 40% over the next 20 years. That'll require a staggering amount of coal, oil and gas.

But its not just fossil fuels that will get the nod. The demand for renewable energy sources
is exploding, and according to new study, we havent seen anything yet in terms of
spending on solar, wind and other green energy projects. For investors, that spending could
lead to some serious portfolio green as well.

Rising Market Share

The future is certainly looking pretty green for renewable energy bulls. A new study shows
that the sector will receive nearly $5.1 trillion worth of investment in new power plants by
2030. According to a new report by Bloomberg New Energy Finance, by 2030, renewable
energy sources will account for over 60% of the 5,579 gigawatts of new generation capacity
and 65% of the $7.7 trillion in power investment. Overall, fossil fuels, such as coal and
natural gas, will see their total share of power generation fall to 46%. Thats a lot, but down
from roughly from 64% today.

Large-scale hydropower facilities will command the lions share of new capacity among
green energy sources. However, the expansion by solar and wind energy will be mighty
swift as well.

The Bloomberg report shows that solar and wind will increase their combined share of global
generation capacity to 16% from 3% by 2030. The key driver will be utility-scale solar
power plants, as well as the vast adoption of rooftop solar arrays in emerging markets
lacking modern grid infrastructure. In places like Latin America and India, the lack of
infrastructure will actually make rooftop solar a cheaper option for electricity generation.
Analysts estimate that Latin America will add nearly 102 GW worth of rooftop solar arrays
during the studys time period.

Bloomberg New Energy predicts that economics will have more to do with the additional
generation capacity than subsidies. The same can be said for many Asian nations. Increased
solar adoption will benefit from higher costs related to rising liquid natural gas (LNG)
imports in the region starting in 2024. Likewise, on- and offshore wind power facilities will
see rising capacity as well.
In the developed world, Bloomberg New Energy Finance predicts that CO
2
and emission
reductions will also help play a major role in adding additional renewable energy to the grid.
While the U.S. will still focus much of its attention towards shale gas, developed Europe will
spend roughly $67 billion on new green energy capacity by 2030.

Impressive Renewables Growth

While fossil fuels will still be a massive source of power, the growth in renewables will still
be impressive. And that impressive growth could be worthy of portfolio position for
investors. The easiest way to play it is through the PowerShares WilderHill Clean Energy ETF
(PBW).

The $200 million ETF tracks 57 different green energy firms, including stalwarts like
Canadian Solar Inc. (CSIQ) and International Rectifier (IRF). So far, PBW hasnt lived up to
its promise and the fund has managed to lose around 8% a year since its inception in 2005.
Thats versus a 7% gain for the S&P 500. Yet, the fund is truly a long term play and could
be a good buy at these levels given the estimated spending. Another option could be the
iShares Global Clean Energy (ICLN), which only has about 35% of its portfolio in U.S.
stocks.

For solar and wind bulls, both the Guggenheim Solar ETF (TAN) and First Trust ISE Global
Wind Energy ETF (FAN) make adding their respective sectors a breeze. Cute tickers aside,
both the TAN & FAN have been monster winners over the last few years as both solar and
wind power makers have once again returned to profitability. With the sun shining and the
wind at their backs, the new report could help push share prices higher over the next few
decades.

Finally, as stated above, hydropower will be the dominant renewable energy source driving
spending in the years ahead. While General Electric Co. (GE) exited the hydropower turbine
business a few years ago, it still makes software and other products for the industry. More
importantly, its recent buy of Frances Alstom SA will put it right back in the driver's seat of
the hydro-market. Alstom is one of the leading producers of hydropower turbines in the
world. Not to be outdone, rival Siemens AG continues to focus on small-scale hydro-electric
facilities. Both GE & Siemens make ideal selections to play that renewable sources
expansion.

The Bottom Line

Bloomberg New Energy Finances recent report shows just how far renewables will go
towards our generation needs. Given the anticipated spending spree in the sector, investors
who choose to "go green" could see their holdings grow along with the demand for energy.
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