Sustainable Investments: How renewables contribute to mitigating global crises
It seems that in this day and age a crisis is at our doorstep one after another. It is understandable that global issues affect the markets as they are naturally intertwined. Panic and disruption in society affects how consumers react and the market follows. Following the Russia-Ukraine conflict, the worldwide oil and gas market has seen a dramatic escalation of fuel prices in the last weeks, causing insecurity of supply and uncertainty for the future of production costs.
The real question for investors is what risk are they willing to take? Yes, markets will stabilize eventually, and they did so after an initial spike. According to the EEX Market Data Services, the European Gas Spot Index reached a maximum of + 250 €/MWh, more than 300% higher than at the beginning of the year. However, almost a month in the prices are still 40% higher than prior to the Russia-Ukraine conflict, with sanctions having only increased over time, no peace deal in sight, and increased inflation already existing from the pandemic recovery.
Rising prices are not just a short-term issue
According to the Forbes report on an analysis by Goldman Sachs, oil prices could hit $125 per barrel by this summer. The analysts also predict that the Russia-Ukraine conflict and the uncertainty around possible sanctions will create a “supply shock” in global energy markets, which are already in tight supply. The price volatility likely is what will remain constant with an overall increase in energy costs in the long term.
Market volatility is troubling in the short term, leading to higher inflation
The energy price increase is a significant issue; its impacts rapidly manifest in various aspects of daily life. Energy prices rose 68% for German firms in February and producer prices are up a record 26%. However, the determining factor is the volatility of the markets. We have entered a period of high market volatility due to a new international geopolitical situation that may last a few months before stabilizing. Therefore, it is in the interest of companies to reduce the risks caused by this volatility, which impacts both future energy bills as well as short and long-term investment planning.
EUs fossil fuel dependency
It is now well known how dependent the EU is on Russian gas. Over 40% of the blocs gas is imported through 3 steady pipelines into the continent. In the words of EU environment commissioner Virginjus Sinkevicius, "I don’t need to go into our dependency on fossil fuels, and how many billions every year we pay to Russian war chest," he told a news conference in Brussels. This is a steady and crucial income to Russia considering that the EU accounts for over 70% of their gas exports, and so a complete block could have devastating affects to Russia’s already fragile economy.
The truth of the matter is that we cannot just turn off the tap with Russian gas. The tight grip has already chocked some consumers, and governments have had to temporarily halt carbon taxes in order to stabilize fuel costs. There are strong fears that in order to compensate for the lack of gas, coal plants should start ramping up production, damaging the EU's 2030 targets to cut net emissions 55% from 1990 levels. So what are the alternatives?
Germany’s Economy Minister Robert Habeck made a spontaneous trip to both Qatar and the UAE to secure new sources of natural gas. Importing gas from the gulf states would be in the form of LNG, which requires terminals which Germany currently doesn’t have and would need to use those in neighboring countries. With the UAE, Habeck also discussed the purchase of green hydrogen, providing an alternative that wouldn’t hinder Germany’s NDCs. On the other hand, the Netherlands has announced its plans to ramp up its offshore windfarms, doubling the planned capacity with an additional 10.7 GW. This additional capacity is also aimed to provide heavy industries with a sustainable energy source, for example by producing green hydrogen. The signs can’t be more apparent.
There is a way out
Solutions exist. Renewable energy technologies have already proved their technical and economic capabilities of supplying sustainable heat, cooling, and electricity by utilizing solar thermal collectors, photovoltaic modules, and heat pumps. Moreover, the methods and applications to combine these technologies to obtain an optimized technology mix are mature and available in the market. Current energy prices allow innovative solutions to achieve unprecedented rates of return on investment reaching less than 5 years and some cases, even below 3 years.
Christian Zahler, the CEO of Clean Industry Solutions Holding Europe AB, says that “There has never been a more appropriate time to invest in green technology. Not only is it a safe investment as the market shows, but it strengthens our ability to make society more secure and resilient in such precarious times.” Clean Industry Solutions is a holding which has subsidiaries providing sustainable solutions across the industrial sector including energy and water. By investing in a variety of companies, they are able to tap into synergies to make the industrial sector greener and more sustainable.
Investment in sustainable technology is a sustainable investment
Diversification is not only a smart investment strategy, but inherently a tactical move to secure our own supply and production. By controlling and securing our own supply, risk in investments decreases in the long run, especially in markets where the supply is always external. The question at this point becomes a moral one. When we finally can secure our own supply and production for necessary commodities, at what cost are we willing to pay for them?
Referring back to Virginjus Sinkevicius's quote on our fossil fuel dependance, is it not clearer now than ever to move away from finite and unreliable sources to finally secure a just and green future?
For further information, please contact:
Christian Zahler
CEO
T: +46 611 81 06 10
E-Mail: christian.zahler@cleanindustrysolutions.com
Amudova AB is Clean Industry Solutions’ certified adviser.
T: +46 8 546 017 58
E-mail: info@amudova.se
Clean Industry Solutions Holding Europe AB
c/o Win-Win Ekonomi AB
Palmfeltsvägen 21
SE-121 62 Johanneshov/Sweden
E-Mail: info@cleanindustrysolutions.com
Internet: www.cleanindustrysolutions.com
Clean Industry Solutions Holding Europe AB holds 100% of Industrial Solar GmbH and 100% of SolarSpring GmbH - both located in Freiburg/Germany.
Industrial Solar GmbH is an international leading technology and solution provider, which develops projects mainly based on its innovative Fresnel collector technology suitable for fulfilling an expected growing market of solar process heat. As a one-stop-shop Industrial Solar offers turnkey solutions for customers in several industries.
Find out more about Industrial Solar GmbH at the following address:
https://www.industrial-solar.de/
Founded in 2009 as a spin-off of the Fraunhofer ISE, SolarSpring GmbH - membrane solutions, has evolved into an international pioneer in the field of membrane distillation offering innovative waste- and drinking water treatment technology.
Find out more about SolarSpring GmbH at the following address:
https://www.solarspring.de/
