Independent global energy think tank Ember has published a study outlining how government inaction on renewable energy targets is inhibiting investors in the critical but capital-dependent industry.
Renewables like solar and wind energy have made major gains over the past decade thanks to policy support and reductions in costs, but such projects require significant capital support in their initial stages, making them heavily reliant on investor funding. However, insufficient government action is making investors uneasy about green energy, and many are considering relocating their capital to other low-risk sectors.
According to Ember, countries remain far from achieving the COP28 pledge to triple their green energy capacity by the end of the decade. Recent data from the think tank reveals that current national renewable energy targets will ultimately double global renewable energy capacity, rather than triple it.
Additionally, just seven nations outside the European Union have updated their renewable energy targets since the historic COP28 goal was set, with some countries even scaling back their 2030 green energy targets.
This inaction creates regulatory and policy uncertainty, especially in America’s polarizing political landscape, and investors may be unwilling to fund renewable energy projects that could be endangered by future policy changes, similar to how President Donald Trump’s policies have affected America’s renewable energy sector.
Green energy targets play another key role in accelerating adoption as they are often accompanied by supportive policies like carbon pricing, auction schemes, and tax credits that make it easier for renewable energy projects to compete with established and subsidized fossil fuels.
When governments are inactive on renewable energy targets, investors can anticipate the loss of these supportive measures and pivot to less risky and more profitable investments. Green energy targets also drive demand for clean energy by encouraging industries to decarbonize and requiring utilities to purchase more renewable power.
Lacking concrete targets and the certainty provided by mandated renewable energy goals, companies are much less likely to invest in the infrastructure needed to use clean energy, such as electrifying their factories or vehicle fleets.
Some types of clean energy perform especially well when governments set renewable energy targets. Offshore wind, for instance, is particularly reliant on targets due to its long lead times, with estimates showing that offshore wind development in the UK and Spain can take 12 and 10 years respectively.
Without clear governmental commitment and long-term policy stability, investors will continue to shy away from such renewable energy projects, ultimately slowing the global transition to clean energy and undermining international climate goals that require immediate and sustained action.
Private sector players like PowerBank Corporation (NASDAQ: SUUN) (Cboe CA: SUNN) (FSE: 103) can work as best they can to increase renewable energy uptake, but governmental action is a needed force multiplier in these efforts.
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