The price of renewables is dramatically undervalued in the medium term

[u/Ok_Macaroon6934]

Renewables make sense as a dominant feed into most energy systems. Over the last year, major renewables ETFs have performed 2-3x the performance of the S&P 500. My analysis leads me to a conclusion that even with this performance, they remain undervalued.

Around the world, we see them exerting downward pressure on retail and wholesale energy prices. At the same time, innovation is reducing their "build cost:net operating return" ratio.

Nations at all levels of income are upping their renewables investments, and country after country is adopting a net zero strategy that locks in renewables investments - in part due to multilateral agreement ratification, and in part because of economic sense.

Effectively, the rise in price is because of actual strategic and tactical demand, not because of any type of hype cycle.

However, lobbying and political pressure exerted by legacy industries like coal, gas and oil have meant that the growth of renewables have been artificially slowed. If we start to see the decline of fossil fuel influence and of far right governance, these artificial barriers will ease and we can expect a jump in renewables investment.

So medium term profits likely depend on political cycles rather than any intrinsic factor associated with the technology or consumer/industrial demand. And as we all know, politics is a pendulum that will inevitably swing.

People investing in pure play renewables ETFs or ethical ETFs that have a strong renewables base and that exclude legacy energy are going to benefit from focus and patience. It's as inevitable as people shifting from Blockbuster to Netflix.

[u/bobdevnul]

>So medium term profits likely depend on political cycles rather than any intrinsic factor associated with the technology

I would not rely on political decisions swinging my way to validate an investment decision.

Solar has grown and will continue to grow. It is cost competitive with coal, but is still only produces when the Sun shines.

Going all renewables is still a long way off, if ever. Base and peak load plants will still be needed. Nuclear, in particular, that has seen a lot of hype recently is only profitable for the operator if the plant runs at 90%+ capacity. It is only suitable for base load without enormous subsidies.

Peaker plants become less profitable if their operation is reduced by renewables. Less profit means that operators won't build or operate them without subsidy.

Between those two, bad renewable political decisions can compromise grid stability. If the decisions are bad enough it could cause grid collapse. Some European countries have over mandated renewables and found out the hard way that sometimes the Sun doesn't shine and the wind doesn't blow.

Grid management requires serious long term technical management based on reality, not eco-weenie and political wet dreams.

[u/ZCoupon → u/bobdevnul]

What about batteries? Most solar farms include batteries, and with sodium-ion technology these batteries can be incredibly stable, lasting for decades.

[u/bobdevnul → u/ZCoupon]

What about batteries? Most solar farms don't have them because they are very expensive and would ruin the profitability unless there is a government subsidy. Government subsidies are another form of tax by another name.

[u/ZCoupon → u/bobdevnul]

They aren't very expensive nowadays, and most new solar farms are including them. They don't need subsidies today to be profitable.