Published July 6, 2021 | 1 min watch
Key Points
- Renewable power in the EU exceeded electricity generated from fossil fuels for the first time in 2020.
- But Europe still needs to very significantly increase the capacity installed in order to meet 2050 targets.
- Investors are attracted to renewables as infrastructure-like assets, with steady returns, that help meet ESG mandates.
- Emerging technologies, like storage, biofuels and hydrogen are also proving appealing to investors.
Renewables have come a long way. In the EU in 2020, renewable power exceeded electricity generated from fossil fuels for the first time and globally a new record of 260 GW of new renewable power was installed. But there’s still quite a long way to go to meet net zero targets for 2050. Europe needs to potentially quadruple its renewable capacity between now and 2050 compared to what’s been installed over the last ten years. And that’s going to take trillions of euros worth of investment.
“An ever increasing proportion of power that's generated in the UK and Europe is going to come from renewables, and that's going to require significant investment from the capital markets. And that's going to be both in terms of equity and from debt.”
Matthew Coakes, Head of Energy EMEA and Co-Head of Broking, RBC Capital Markets
It’s a big ask, but investors have a growing interest in the sector. For many, renewable power is an infrastructure-like investment, offering steady returns and helping them meet ESG mandates. That appetite helped renewables equity issuance reach a huge volume last year. Around $8.5bn was raised, twice the amount that was raised in 2019. And in 2021, the same amount has already been raised, halfway through the year.
The renewables infrastructure market in the UK alone has grown to 17 listed companies, with a market capitalization of over £10bn. Investors are represented by sovereign wealth funds, pension funds and dedicated renewable funds. On the strategic side, historically it’s been utilities and renewable developers that have invested in the technology, but increasingly, energy majors and industrial players are moving into the space.
Emerging technologies, like storage and power to X, are also proving appealing to investors, even when the companies involved are at early stage. With huge volumes of renewables equity issuance moving through the markets, those trillions may yet be achieved.
