Why Invest in Renewable Energy Funds?

Renewable energy is the investment opportunity of a generation. It is the investment trend that will, literally, power the world this century. As the world’s major economies push towards net zero emissions - the goal of reducing to zero or negating all carbon dioxide produced through human activity by 2050 - clean power is essential to keep the world running. 

In practice, this means the electrification of our power sources: switching from fossil fuels like gas and oil, into power derived from sources like sun, wind, water, hydrogen and biofuels. The question facing investors is not whether to invest on this theme, but how. 

In Europe alone, the energy transition investment opportunity is worth close to €1 trillion. That is the amount that needs to be invested in proven energy infrastructure technologies - wind power, solar power and battery storage - to achieve the energy transition. The pace also needs to pick up: renewable energy construction in Europe needs to quadruple each year to hit the EU’s 2030 targets. 

Thankfully, these goals are supported by a region rich in diverse opportunities across the clean power system. Europe offers strong winds from the Atlantic in winter, and strong sun in the south in the summer, allowing pan-European fund investors to smooth out seasonality. Through these conditions, Europe works towards its goal of improved energy independence. 

Asset creation — on a significant scale — is paramount. The role of private capital has never been more important in helping to protect our world for future generations. Not only is a necessary transition taking place in Europe, but it has the full support of the European Union through the European Green Deal. This creates excellent conditions for investors looking to deploy capital into the sustainable infrastructure that will drive Europe’s decarbonisation - and achieve long-term, stable and robust income. 

While policy is fully aligned with buoyant investor appetite, accelerating the construction of renewables infrastructure to meet EU targets requires innovation — at policy and engineering level — the likes of which the industry has never seen before. 

To build at scale, the first prerequisite is for planning processes to be faster so that the asset pipeline can keep pace with investor demand. Even after this is resolved, the industry may still contend with supply chain issues and shortages which go beyond the well-documented minerals crunch. For instance, the construction of offshore wind has been hampered by the availability of specific vessels for foundation and turbine installation — especially as turbines become higher. This needs urgent attention now, as vessels themselves can take a few years to commission and build.

Even once the assets are approved and built, clean power could face yet more delays in reaching homes and businesses while it waits to be connected to the grid. We need a lot of grid capacity, and we need it to work. Timeliness of grid connection can vary hugely between markets, depending on differing systems; and the more renewables assets come on line, the more pressure points we create. Firming of grid and its ability to in turn support the transition to renewables presents further investment opportunities including both short and long-term storage technologies.

Of course, not all renewable energy funds are created equal. Institutional investors have numerous options to put green capital to work. NTR chooses to invest in proven technologies — wind power, solar power and battery storage. These are the technologies we see as investment grade: able to commercialise at scale, most likely to be awarded planning permission and grid connection, and at present the most cost-effective route to decarbonisation. 

This is the true reward of renewable energy investment: the knowledge that your capital will have an impact for the long term, contributing to the future success of our planet and communities. Net zero is a daunting goal, but it is one that inspires the asset managers and engineers at NTR.

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