IF FINANCE FOCUSES ON RENEWABLES WITH DECISION

By Eladio PASCUAL – Director of Audax Renovables Operations

“We believe that sustainability should be our new standard for investing” or if you prefer in the Italian translation “We believe sustainability should be our new investment standard.”.

That traditional finance is looking with interest at renewables – as an opportunity, certainly – has been made clear by Larry Fink, CEO of BlackRock, the largest fund manager in the world. In usual letter went further, saying the company would remove from its portfolio the stocks and bonds of companies that earn more than 251 tp3T of their profits from coal production.

The path seems to be marked. We are talking about the now solid link between the financial world and renewable sources. Data from recent years indicate that investors are increasingly orienting themselves towards the world of energy green. Well before, therefore, that the climate change became a question of primary importance and a source of concern for world public opinion and – consequently – was automatically included in the agendas of the respective governments.

Let's see some data. The figures provided by BloombergNewEnergyFinance on the amount of investments dedicated to renewable energy alone, show how in 2019 they reached 282 billion dollars, with +1% compared to 2018. The data discounted some critical issues in the photovoltaic sector, due in particular to the strong contraction in the Chinese market. However, it should not be forgotten that, in 2017, the data had been very good, with 315 billion dollars invested, as well as in 2015 with the achievement – for the first time – of the 300 quota. 

And over 300 had been the estimate made by analysts for this 2020, before Covid-19 made its appearance, overturning what had been predicted.

In any case, going beyond this troubled and exceptional first half of 2020, and imagining a return to normality, it is very likely that investments will start to rise again. 

In fact, looking at the graphs for the period 2004-2019, we can see how the curve, beyond some limited declines, has always pointed upwards. To give the dimensions of the growth, it is sufficient to consider the starting point: 32 billion invested 16 years ago against, precisely, the 282 of today.  

If we then examine the data which, in addition to renewable energy, also includes the so-called "energy and smart technologies" and "Low carbon services", the figure not only exceeds 300 billion but has done so uninterruptedly since 2014.

Important numbers also emerge from the Global Trends in Renewable Energy Investment 2019, commissioned by UNEP, the United Nations Environment Programme. Over the course of a decade, renewables have surpassed $2.6 trillion in investments.

Leading the ranking of countries that have invested the most in RES is China, with over 750 billion dollars. The United States follows at a distance with 350 and Japan, with 200. Europe, as a whole, reaches almost 700 billion; Italy occupies the seventh position with 82 billion, while Spain is eleventh, with 35. 

In 2018 alone, investment in RES exceeded $270 billion, three times more than that invested in fossil fuel production.

Interesting data on solar, whose capacity following these 10 years of investments has increased by 26 times, going from 25 GW in 2009 to 663 in 2019. To give you an idea, the amount sufficient to produce the electricity needed to power approximately 100 million US families.

In 2018, 29 countries joined the “club” of those who invested more than 1 billion in renewable energy projects. An increase in numbers, since they were 25 in 2017 and 21 in 2016. 

Among the subjects attracted by the RES business there are also countries, such as those of the Gulf, that have lived on oil and hydrocarbons and – in all likelihood – will continue to live for the next decades. At least until the energy transition is in a more advanced stage.

The reason for this interest – not new, but which has intensified in recent times – is twofold: to invest in a growing market to obtain good profits and to strategically guarantee an energy future when the right time comes. From Renewable Energy Market Analysis: Gcc 2019, carried out by the International Renewable Energy Agency (IRENA) shows that Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, by exploiting renewables, would save 354 million barrels of oil equivalent (-23%), equal to 46-76 billion dollars. A result that in addition to the economic side will have positive repercussions on the environmental side - 22% of carbon emissions avoided and 17% less water used - and on the social side for the number of jobs created.

If investing is important, attracting investment is equally important.Italy it is placed at 17th place for attractiveness, according to the 54th edition of the EY study “Renewable Energy Country Attractiveness Index” (Recai), which ranks the best 40 countries in the world based on development opportunities in the renewable energy sector. This is a leap forward of one position compared to 2018; the same is true for Spain, which rose to 15th place (it was 16th). At the top are China, the United States and India which takes the place of France, which fell to 4th.

From this year onwards, with the adoption of the National Integrated Plan for Energy and Climate – more simply PNIEC – even in Italy it will be possible to resort more easily to financial instruments such as PPA (Power Purchase Agreement), essential to promote and facilitate investments in the field of renewables, especially solar photovoltaic. And the Audax Group in this regard has been among the pioneers in the use of these tools, both in Spain and in Italy.

In short, the path, as we said at the beginning, is now marked.