Renewable Energy

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21 Aug, 2024

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Renewable energy refers to the energy extracted by wind, sunlight, and other renewable resources. Industries and businesses invest in this form of energy to steer clear of disruptions, which may include resilience to the weather-related effects resulting from climate change.

This type of energy lowers greenhouse gas emissions and reduces air pollution. Moreover, it diversifies energy supply, reducing the reliance on fossil fuels. Making the switch to renewable energy is vital to address the climate crisis. There are different types of this energy form. Some of them are wind, solar, bioenergy, and geothermal.

What Is Renewable Energy?

Renewable energy meaning refers to a type of energy formed using natural processes and resources like water, sunlight, etc. These resources are inexhaustible. In other words, they are replenished constantly.
A noteworthy advantage of renewable energy is that its generation is associated with lower variable costs when compared to non-renewable energy generation.
The different types of this energy are wind, hydroelectric, solar, geothermal, and bioenergy.
When burnt, fossil fuels, such as oil and gas, emit gasses like carbon dioxide, thus harming the environment. On the other hand, renewable energy sources do not emit harmful gasses.

Renewable Energy Explained

Renewable energy refers to a form of energy that comes from natural resources that get replenished constantly. Businesses or individuals can utilize it for water and space cooling and heating, transportation, and electricity generation. The use of this energy form is reducing pollution. Moreover, it is significantly impacting energy security and economic benefits. The sources of renewable energy have little to no carbon footprint. A few examples of the sources are the sun, wind, and water.

People often associate this type of energy with clean and green energy. That said, one must know that they have some subtle differences. For example, renewable sources refer to those that can be recycled, while clean energy sources do not release carbon dioxide or any other pollutant. That said, green energy comes from natural resources. While a crossover between these energy forms is common, not every type of renewable energy is entirely green or clean. For instance, some hydroelectric sources may affect natural habitats and lead to deforestation.

Since the sources of renewable energy are causing less pollution than burning fossil fuels, nations worldwide are looking to establish new norms concerning carbon emissions. The factories and industries they will establish will have ratings based on their carbon emission. Moreover, the products they manufacture will get a rating accordingly.

Considering the tax credits the U.S. government offers, there are many incentives to produce and invest in renewable energy. Such tax credits incentivize the developers to keep investing in these assets, hopefully making them cheaper.

One must note that two kinds of tax credits exist primarily for solar and wind renewables – Production Tax Credit (PTC) and or Investment Tax Credit (ITC)

Types

These are the types of this energy form:

Solar Energy: Businesses can harness solar energy even if the weather is cloudy. Solar technologies have the ability to deliver cooling, electricity, and natural lighting besides fuel for several applications. While not every nation is endowed with this energy type, all countries can have a significant portion of direct solar energy in their energy mix.
Geothermal Energy: It uses thermal energy from the interior of the Earth. Firms utilize wells or any other means to derive heat from geothermal reservoirs. The technique involving electricity generation using hydrothermal reservoirs is reliable and mature. Moreover, it has been operational for over 100 years.
Bioenergy: Bioenergy production takes from different organic materials, known as biomass, like heat, charcoal, wood, dung, etc., for heat and power production. Modern biomass systems have dedicated trees or crops, residues from forestry and agriculture, and different organic waste streams.
Wind Energy: It harnesses moving air’s kinetic energy by utilizing large wind turbines that one can find in the sea or on land. Although this energy form has been in use for many years, the technologies related to it have evolved only over the past few years to ensure that electricity production rises to the highest possible level – with larger rotor diameters and taller turbines. Although one can find strong wind speeds in many locations worldwide, sometimes the best areas for wind power generation are the remote ones.
Hydroelectric Energy: The creation of hydropower involves utilizing the movement of flowing or falling water. They generate electricity via underwater turbines. Moreover, hydropower encompasses tidal and wave power, which depend on ocean forces for generating electricity at large waterbodies’ mouths. One must note that hydropower is the biggest source of this energy form by far.

Examples

Let us look at a few renewable energy examples to understand the concept better.

Example #1

Amazon is implementing five new wind and solar projects in multiple locations across the southeastern part of the United States. This move will expand its renewable energy footprint as the total number of renewable energy projects will rise to 30 in that region. According to estimates, the projects can produce clean energy of more than 7,500 GWh post-completion. This figure is the same as the amount of electricity needed to power over 713,000 homes every year. As of July 7, 2023, Amazon had over 400 renewable energy projects worldwide.

Example #2

Ericsson, the telecommunications giant based in Sweden, unveiled its new 5G site in Texas, United States. This site showcases the company’s commitment to sustainability. Moreover, it highlights renewable energy sources and energy-efficient solutions’ integration.

Per the official release, a standout characteristic of Ericsson’s new site in Plano, Texas, is its ability to be entirely powered by solar energy and integrated lithium-ion batteries that can offer uninterrupted operations for a maximum of 24 hours.

Pros And Cons

Let us look at the benefits and limitations of allocating funds to renewable energy.

#1 - Pros

Ensures Cash Flow Stability

Usually, brownfield renewable assets are associated with a PPA or Purchase Power Agreement. In most cases, such PPAs are locked-in, long-term contracts that generate predictable and steady cash flows. Usually, this is the most appealing feature of allocating funds to renewable assets. This also makes it easier to determine the valuation using the DCF or discounted cash flow model.

Low Variable Costs

Generally, renewable assets incur a negligible marginal cost for each use. For instance, the incremental costs for a wind power plant powering an additional household will be very small.

Non-Cyclical Nature

Usually, renewable assets like solar and wind plants are one of the sub-sectors of the power and utilities industry. This industry is non-cyclical and is known to be quite defensive in the case of economic downturns. The reason behind this is that individuals will always utilize and require energy. After all, it is a fundamental necessity of life. Hence, the continuous requirement for energy makes a renewable asset’s nature non-cyclical, which is another key advantage of renewable energy.

#2 - Cons

Weather

With solar and wind plants generating energy from renewable resources, the assets get exposed to the risks associated with nature and weather. As harmful weather events keep occurring, renewable assets are subject to risk until further developments happen.

Intermittent

One cannot control the risk associated with this form of energy during the time of generation. It results in intermittent risk as renewables cannot consistently cover each hour in a day, particularly the peak hours. To reduce this risk, introducing a long-lasting and affordable battery is necessary for storing the energy generated for the entire day to sustain peak-hour usage.

Renewable Energy vs Fossil Fuels

With nations across the world transitioning to renewable energy to improve environmental conditions, one needs to understand how it differs from fossil fuels. So, let us look at their distinct characteristics provided in the table below.

Renewable Energy	Fossil Fuels
Businesses or individuals have to derive it from natural sources that are replenished during the lifetime of an average human.	It can take thousands of years or even more to replenish fossil fuels.
This form of energy can be biomass, geothermal, wind, solar, or hydro.	Fossil fuels can be coal, oil, and natural gas.
It is cheap to utilize.	Fossil fuels build up costs constantly as businesses must find, extract, and transport them to the power plants before using them.
It is much better for the environment.	Burning these leads to carbon dioxide emissions, which causes irreversible damage to the environment.

Renewable Energy vs Non-Renewable Energy vs Sustainable Energy

Understanding the meaning and significance of renewable, non-renewable, and sustainable energies is crucial to understand the concepts fully and avoid confusion. In that regard, looking at their critical differences is imperative. So, let us find out what they are.

Renewable Energy	Non-Renewable Energy	Sustainable Energy
The primary sources of this energy form are sunlight, water, wind, and other natural sources.	The primary source of non-renewable energy in the U.S. is fossil fuels like oil, coal, and natural gas.	Unlike non-renewable energy, it comes from sources that fulfill current energy requirements without jeopardizing future generations.
Renewable energy can be sustainable only if the resource replenishment rate exceeds the resource utilization rate.	This energy form is not sustainable. In this case, the resource utilization rate is more than the resource replenishment rate.	As one can guess from the name, this energy form is always sustainable. Moreover, the generation of this energy occurs using natural resources that get replenished during the lifetime of an average human, unlike non-renewable energy.

Frequently Asked Questions (FAQs)

1. Which renewable energy is the best?

Many experts believe that the most efficient and effective way to harness this energy form is wind. This is because one can keep windmills in any open area also utilized for farming. Thus, it offers flexibility. Typically, organizations construct multiple wind turbine rows along coastal areas in which nothing can interrupt the wind flow.

2. Is renewable energy reliable?

Biomass and hydroelectric power are two of the most dependable sources of this type of energy. Like in the case of biomass, multiple power generation forms often utilize hydroelectric power plants as backup resources.

3. Does Malaysia have renewable energy?

Malaysia has been making big strides in fostering sustainable investments and improving its renewable energy sector to establish itself as a leading country for global and research services.

4. Will renewable energy stocks go up?

Considering that the future of this energy form is bright, equity with exposure to green energy can generate significant returns for investors. That said, one must conduct thorough research and analysis before adding stocks to their portfolio.