Renewable Energy Increasingly Attractive to Pension Funds, Oil, Insurance, Industrial Companies
10/21/2011
SustainableBusiness.com News
Progressive oil companies, insurance companies, industrial, companies, major utilities and pension funds will all soon be big investors in renewable energy, says Swiss-based Bank Sarasin.
The more prices fall, the greater their interest becomes.
Lower prices mean a shorter payback period for investments. The payback period for a wind project, for example, is a fraction of that for nuclear. Combined with the safety concerns over nuclear power and construction costs - which tend to skyrocket once build-out begins, renewable energy is a much more attractive investment, says Sarasin.
Banks would rather lend to wind projects that can be built in 12-18 months than to nuclear plants, which take 10-15 years to build.
Pension funds are already big investors in renewables, as many of them seek investments that address climate change and decentralized energy that jump start emerging nations.
It's inevitable that oil and gas firms invest in clean energy to diversify beyond their finite business model. Statoil in Norway is staking out expertise in offshore wind. Many of the majors have had renewable energy divisions for many years, such as BP Solar and Shell Wind.
Also, insurers such as Allianz and Munich Re are investigating investments in wind and solar plants to boost profits, says Sarasin.
Renewable energy has been the fastest-growing energy industry segment for the last ten years. Worldwide clean energy investments reached an all time high of $45.5 billion in the third quarter of 2011.
The current climate of falling prices and bloated inventory will lead to an industry shakeout that's tough in the short term, but will end up restoring the industries to balance and reward more innovative companies.
Sarasin administers renewable energy funds worth about $1.8 billion for private and institutional investors, the bank says.