What are the economic benefits of renewable energy?

What are the economic benefits of renewable energy? 

The investment and rollout of renewable energy supports environmental goals and delivers strong economic value. Benefits that arise from renewable plants include job creation in the clean energy sector and fulfilling environmental, social, and governmental (ESG) goals. Renewable alternatives can also result in reduced energy costs over time, governed by growing green investment markets, and create investment opportunities. The successful rollout of renewable energy can also lead to improved energy security, alleviating the reliance on fossil fuels and preventing energy bottlenecks and power outages. 

Job creation and employment growth 

Renewable energy can help a business hit ESG - personal targets that a company aims to hit to be more sustainable. The environmental link to renewable energy is an obvious one - the more renewable energy a company consumes, the more it can contribute to the environmental element of its ESG goals. However, investing in renewable energy can also contribute to social goals by creating jobs in the renewable energy sector. This can be done from within a business by hiring a team to manage renewable energy generated on-site via a personal renewable array or directly in the renewable energy sector by the renewable plant from which the consumed energy originates. 

Jons can be created to backfill the fossil fuel-linked jobs lost by the green energy transition by reskilling workers from fossil fuel industries, giving them careers that will span a much longer period than fossil fuel-related employment. Investing in new renewable power stations can also result in regional economic development, particularly creating rural jobs in areas where employment can be scarce. The industries that may create an important uplift in jobs could include solar, wind, and battery storage sectors, which tend to be located in more rural and remote locations.  

Lower energy costs and long-term savings 

Investing in renewable energy can result in long-term cost savings for energy producers and procurers.  

Decreasing levelised cost of energy (LCOE) 

The levelised cost of electricity (LCOE) is a method of measuring more alternative forms of electricity and concerns the overall cost of a plant over its lifetime. While renewable energy has high upfront set-up costs, in time, the costs come down as costly combustion methods are not required to fire up the plants. Over time, a plant's LCOE is likely to decrease.  

Reduced fuel price volatility 

While renewable energy is a volatile source of energy and experiences volatility when it comes to energy pricing because of this, there are ways that renewable energy can reduce fuel price volatility. This is because when energy procurers consume only one type of energy, they are at the mercy of that energy source's pricing. However, a financial instrument called hedging can help to reduce this reliance on one type of energy - and one type of pricing - by spreading the risk of an energy price increase or reduction by consuming several different types of energy. For example, if fossil fuels experience a price hike, the renewable element of a portfolio may be at a lower rate, bringing the overall cost of the energy portfolio down.  

Boost to energy independence and security 

While some countries produce and consume their own energy, other countries do not produce enough energy to meet the demands of their entire region, meaning they must rely on other countries to purchase energy from. These are often fossil fuel producers, such as gas or oil. Sometimes bottlenecks occur, transmission or pipelines fail or the cost of energy is increased by that energy producing region, risking the energy independence and security of the energy procuring country.  

In the form of microgrids, decentralised grids or smaller renewable arrays, local renewable energy production reduces import reliance on large fossil fuel producers. Sometimes, these energy hikes from energy-producing countries to energy-producing countries can be a political statement. If the procurer does not support the political motivations of the producer, the producing country may restrict the delivery of energy, threatening the energy security of the procuring nation. Developing local renewable energy, therefore circumventing imported fossil fuels, can reduce geopolitical risk exposure in the future, providing a stable energy supply and grid resilience. 

Attracting investment and innovation 

Clean tech startup growth and venture capital interest 

For the renewable energy transition to take place, governments globally will need to create financial environments that make it easier for renewable energy companies to trade and develop, potentially through funding, incentives or policy. As the governmental policies that support renewable energy get rolled out, more renewable-first tech startups will emerge to apply for funding in renewable research and development areas, with venture capital interest shortly following. Areas of development may concern the plants themselves, the energy markets or software development such as AI or the Internet of Things (IoT).  

Infrastructure investments in grids and storage 

Our grids are currently outdated and incorporate the legacy equipment of fossil fuel connections, meaning that infrastructure investment is needed to modernise the grid and prepare it for renewable energy integration. Because some methods of renewable energy rely on the weather, the equipment, plants, and transmission network can experience damage due to all of these factors. All of these factors result in the development and maintenance of renewable infrastructure being expensive, requiring significant upfront and ongoing financial investment.   

Public-private partnerships supporting green innovation 

For renewable energy to positively impact both public and private sectors, both must invest and partner to support widespread green innovation. But for these partnerships to be successful, sustainable public businesses need to be desirable for investment, which government-led financial incentives and initiatives can facilitate. The dual benefit is allowing private entities to invest in the low-carbon transition, potentially fulfilling ESG goals or avoiding carbon reduction penalties while providing the green sector with funding to innovate and develop.  

Positive impact on GDP and public health 

Public health can also benefit from the green energy transition. With the rollout of greener energy sources, fewer fossil fuels will go through combustion, reducing harmful emissions released into the environment. This in turn could have cost implications for healthcare - less emissions-related illnesses such as respiratory or cancer caused by these emissions would reduce the strain on public healthcare facilities. Economic growth would also occur from the expanding green energy sector. In contrast, funds generated from taxes on renewable energy projects would boost the economy, though governments must be careful to alleviate the tax strain on sustainable industries as the sector continues to develop.  

Renewable energy offers long-term economic rewards, driving sustainable growth, resilience, and innovation while supporting ESG and public health goals.