Renewable energy: industry trends to watch for investors

Renewable energy has gained importance in recent decades as more people begin to understand the impacts of climate change and countries seek to limit their dependence on foreign sources of fossil fuels.

The renewable industry includes various energy sources, including hydroelectric, wind, solar and more. Despite the variety of ways to generate energy, there have been common trends across the industry.

More recently, renewables have regained prominence as a way to combat climate change. They also offer a way for nations to improve their energy security by reducing dependence on imported oil and other fossil fuels.

Current trends

Renewable energy spans many different industries, from wind power to solar energy industries. However, these businesses are interconnected in many ways and there are common trends that investors should keep an eye on.

Batteries and storage

A major drawback of many renewable energy sources is that they struggle to produce consistent output 24 hours a day, 7 days a week, 365 days a year.

Solar panels are excellent in many sunny regions, but the sun sets every night and some days see clouds. Wind power can produce enormous amounts of electricity, but the wind doesn't always blow.

With fossil fuels and other energy sources, energy can be produced without worrying about the vagaries of nature.

A major trend in the renewable energy sector is to find a way to store excess energy when conditions are right for production. Many companies have entered the grid energy storage industry to try to solve this problem.

Some companies have begun to focus on making batteries that are less expensive and have higher capacity. This intersects with other aspects of green energy, such as electric vehicles, where battery capacity is essential.

Since batteries can be applied to all forms of renewable energy, investors are keeping an eye on the growth of this industry and are looking for companies that may be close to a breakthrough.

Solar home installations

A popular way for people to go green and save on electricity costs is to put solar panels on their homes. Thanks to the potential savings and tax incentives available, people have been adding solar power to their homes at an accelerating pace.

In 2020, residential solar production capacity was 2.9 gigawatts. That grew 34% to 3.9 gigawatts in 2021. Through 2022, the industry continued to set quarterly growth records, adding more capacity each consecutive quarter.

Investors looking to profit from this trend can invest in companies responsible for marketing and installing solar home systems.

Offshore winds

One of the main problems with wind power is finding space to place windmills. Wind farms require large amounts of open space, which can be difficult to find in developed areas, such as cities along the east and west coasts.

Offshore wind energy, i.e., windmills located in waters off the U.S. coast, solves this problem by providing large amounts of open space. By mid-2022, more than 40 gigawatts of generating capacity was being developed compared to only 42 megawatts of offshore wind currently in operation.

With approximately 20 gigawatts of capacity under construction or in the permitting phase, this part of the industry is likely to grow tremendously in the coming years.

What it means for investors

Green energy is here to stay and will likely grow in importance in the coming decades. About two-thirds of Americans say they are somewhat or very concerned about climate change, and green energy is one of our best ways to combat this problem.

Investors interested in the industry can look for investment opportunities that expose them to new and growing renewable technologies or seek investments in related sectors. They can also consider divesting from companies focused on fossil fuels, which may become less important as renewable energy capacity increases.