The Renewable Energy Asset Rotation Cycle Is Stuck


Bloomberg NEF calculates that meeting the goals of the Paris Agreement with a combination of zero-carbon electricity and hydrogen would require more than $60 trillion of power sector investment, plus more than $30 trillion of investment in hydrogen production and transport by 2050. Flex a few technical choices – such as switching over dedicated nuclear power plants to manufacturing hydrogen – and the total price tag is $100 trillion or more. To learn more, read “The Renewable Energy Asset Rotation Cycle Is Stuck.” Reading this article may require a subscription from the news outlet.

Key Takeaways:

  • Pumping up the flow of trillions of dollars from giant asset managers to early stage companies looking to make these investments will be a big job for the world’s capital markets and will depend on financial systems functioning perfectly.
  • Currently, some assets aren’t rotating like they used to, particularly in Europe. EDP, Portugal’s major electric utility, rotated 87% of its assets from 2014 to 2016, but intends to only rotate 35% of mostly-renewable assets from now until 2025.
  • There are a number of reasons rotation might be slow.
    • Renewable assets with stable financial returns look attractive on the corporate balance sheet.
    • Green finance allows companies to refinance assets advantageously and increase those returns on their books without cashing out of early-stage assets.

Path to 100% Perspective:

The U.S. is a global leader in renewable energy with the second largest installed capacity in the world. Total private sector investment in renewable energy reached a record USD $55.5 billion in 2019, an increase of 28% year on year. Federal government support for clean energy has been significantly reduced in recent years, with federal energy initiatives primarily being focused on the fossil fuel sector. However, given the scale and depth of its energy market, the U.S. has the economic and technological potential to scale-up renewable energy at an unprecedented rate.