Pandemic Accelerates Push for Renewable Energy
Wind and Solar See Growth
With less people commuting to work due to COVID-19, the number of people refueling at gas stations has also shrunk. These changing work routines caused by the pandemic could lead to a 5% drop in energy demand around the world this year, which would be the largest dip in energy spending since World War II.
While demand for oil and coal is falling, capital is flowing into electric energy markets, mostly in the form of solar and wind. According to the International Energy Agency (IEA), renewable energy will fuel 80% of the world’s electricity demand in the next decade.
The rationale is multifaceted. The upfront costs for solar and wind energy are falling, and so are interest rates. Additionally, governments are putting their support behind clean energy. Combined, those factors could translate to a new clean energy boom.
Lasting Change Remains Uncertain
While wealthy nations might be moving away from oil, developing countries will likely still see demand for the commodity once the pandemic passes. In turn, this might lead to a near-to-mid term oil-investment rebound. In fact, analysts expect global demand for fuel to return to pre-pandemic levels by 2023. Forecasts suggest oil and natural gas will hold on to half of the global energy market for the next two decades at least.
However, less capital is flowing into certain energy sources, coal being one of them. In the last five years, investors placed $91 billion in coal. Projections say that figure will fall by almost half in the next 10 years and then shrink again down to $36 billion by 2040. Meanwhile, investment in renewable power generation could grow from $310 billion to $396 billion by 2040. Similarly, investment in energy efficiency initiatives could nearly double in the same time period, growing from $294 billion to $537 billion.
At the start of the pandemic, greenhouse gas emissions fell dramatically, but this trend might not last. In countries where case counts are low and the economy is growing again, emissions are back where they were before anyone had heard of COVID-19.
Electric Vehicle Enthusiasm
To some extent, the shift away from fossil fuels is highlighted by investors’ appetite for electric vehicle stocks. One of the most high-profile names in the space is Tesla (TSLA), which has seen its shares skyrocket by over 450% so far this year. In fact, just yesterday shares of the EV company continued to move higher after an analyst from Goldman Sachs bumped up his price target on Elon Musk’s company from $400 per share to $450 per share.
Tesla isn’t the only company investors have their eyes on, and the US market isn’t the only one up for grabs. Shares of Nio (NIO) spiked on Wednesday as well after an analyst at JPMorgan almost tripled his price target for the Chinese electric vehicle maker from $14 per share to $40 per share. Analyst Nick Lai says new energy automobile market penetration in China could hit 20% by 2025—up from 5% in 2019. This latest call sent Nio’s stock 22% higher yesterday and the company has now gained over 559% on the year.
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