A recent study undertaken by the International Energy Agency (IEA) and Imperial College, London, reported in the Business Green on Friday that shares in firms investing in renewable energy not only “significantly” outperformed fossil fuel stocks in some of the world’s richest countries but also “displayed far more resilience to the disruption caused by the coronavirus pandemic” since the beginning of 2020.
In what is seen as the likely intensification of an ongoing robust lobby for the strengthening of an already existing case for more investment in the renewable energy sector, the report – “Renewable power investments ‘significantly’ outperform fossil fuels over past decade,” – examined the respective performances of listed companies in the US, UK, France and Germany, that have investments in fossil fuel, comparing those with firms that are active in the renewables sector over the past decade. It reports in its findings that shares in renewable power not only displayed lower levels of volatility but also offered investors “significantly higher” total returns than fossil fuel stocks; findings which the article in the Business Green – one of the UK’s leading sources of information in The Green Economy – says amounts to “a compelling investment case for clean energy.”
The article says that in the United States, renewable power stocks rose by more than 200 per cent over the past decade, more than doubling the total gains for fossil fuels stocks. In France and Germany, according to the report, fossil fuel returns declined by a quarter over the same period while returns from renewables rose by 171 per cent. In Britain, total returns on renewable stocks shows a similar trend.
If the increasingly aggressive environmental lobby for an eventual longer term displacement of fossil fuel with clean energy is less than likely to become reality ‘around the corner’, the coincidence between the ramping up of that lobby and major fossil fuel finds by poor countries is likely to become a matter of vigorous global debate, down the road.
It will be recalled that following on the discovery of huge, ‘game-changing’ oil finds offshore Guyana by ExxonMobil in May 2015, the Apache Corporation and Total SA announced a major oil find off the coast of neighbouring Suriname. From what we know of the extent of these discoveries, they could change the socio-economic directions of the two South American countries, forever.
On the other side of the Atlantic the British oil major BP last year announced a natural gas discovery off the coast of Mauritania, reportedly the energy equivalent of 1.3 billion barrels of oil. In the same year in Mozambique, the French company, Total, secured a US$3.9 billion stake in a giant Liquid Natural Gas (LNG) project which observers say is likely to completely transform the fortunes of that country. What do Guyana, Suriname, Mauritania and Mozambique have in common? They are all poor, underdeveloped countries that may well now see themselves as being on the cusp of prosperity.
The IAE/Imperial College study provides what the Business Green article describes as “striking evidence” that since the escalation of the COVID-19 pandemic and the resulting global economic tremors, renewable power stocks in the US still saw total returns rise by 2.2% over the past four months while fossil fuel stock returns plunged by more than 40%.
The authors of the study caution however, that while the case for investment in clean energy was “a strong one,” its stumbling block was underpinned by the fact that “capital allocation to renewables via stock markets is still falling well short of global targets to decarbonize energy supplies largely due to a raft of obstacles facing investors.”
In the instance of ExxonMobil, having already made huge investments in their oil search, offshore Guyana, the company has not only begun to deliver oil within five years of its announced oil find but has also made a strong public commitment to continue to deliver oil from its Guyana deposits. And with oil prices again seemingly moving in the right direction following a global slump, there is no reason why oil recovery in both Guyana and Suriname will not continue, at least in the short to medium term. What cannot be denied, however, is that while, for the foreseeable future fossil fuel demand will continue to provide sufficiently significant markets, global renewable energy has gradually made its way into influential sectors including the banking sector.
Guyana’s case is an interesting one. The country having made no secret of its delight over its huge oil find and the unprecedented external investment interest that this has attracted, its political leaders continue to verbalise ‘strong’ support for a green energy policy. That may be a function of their anxiety to continue to project the environmental bona fides of the country, even though, with oil now being a new economic reality the Green Economy advocacy could lose much of its traction, down the road.
