klimaVest Strommasten

Renewable energy as a way out of the crisis?

18.04.2023 3 Reading Time

klimaVest: Redakteurin Luisa Schaus
Luisa Schaus

The last few years and decades have certainly left their mark in Europe and around the world. Besides the pandemic and war, the energy industry is now also presenting new challenges – and this is putting a well-known resource in the spotlight: renewable energy.

With a new importance

Fossil fuels have been criticised for a long time – especially with regard to the immense environmental impact caused by the extraction of coal, gas, etc. Sustainable electricity from renewable energies has therefore been gaining in popularity for around 20 years: in 2022, around 48 percent of German electricity consumption and almost half of German electricity generation¹ could be attributed to sustainable energy sources such as wind, water or sun.

However, the outbreak of the war in Ukraine and tougher market conditions made the situation more urgent: gas and electricity prices rose dramatically within a very short period of time – and were passed on primarily to consumers despite government support. Independence from gas imports (as one of the most important fossil fuels) thus gained new importance – and became a question of national and European security².

A future with potential

In many places, the intensified mood of change in the market was taken as an opportunity to advocate a new alignment for the German energy industry – and thus for a long-term, independent and future-proof energy supply.

Renewable energies that can be generated and used directly on site are the focus of the discussions. Unlike Russian gas or French nuclear energy, wind, hydro or solar power can be fed directly into domestic electricity grids.

In addition, renewable energies are a powerful alternative to German coal-fired electricity, one of the most environmentally damaging energy sources. In 2020 alone, electricity generation from lignite and hard coal in Germany accounted for around 126 million tonnes of carbon dioxide³ and thus around two thirds of annual energy-related emissions.

Renewable energies thus offer great potential for the future – not only with regard to progressive global warming, but also with regard to the independence of the German energy industry.

More power, less costs

The current electricity price crisis and the additional burden on consumers also require a quick rethink – and here, too, it is worth taking a look at the performance of renewable energies.

Even though critics keep drawing attention to the supposedly high costs of renewable energies, wind and solar power are among the most cost-effective types of electricity production⁴: while one kilowatt-hour of electricity from hard coal or gas cost between 11 cents and 30 cents in 2021, the costs for photovoltaics were between just 3 and 11 cents and, in the case of onshore wind power, even between 4 cents and 8 cents.

The further the expansion of systems for sustainable energy production progresses, the less conventional energy sources need to be used – and the cheaper the electricity will be for consumers.

Knowledge of the development potential of renewable energy is also increasingly spilling over to the financial market: more and more private and institutional investors are taking advantage of investment opportunities to build or operate one or more renewable energy plants.

The increasing demand for renewable energy contributes to the long-term success of the plants – it is often possible to secure the sale of the electricity produced via long-term purchase agreements. This creates stable income and attractive profit opportunities for investors in the long term.

Investments with added value

In particular, with the introduction of the ELTIF (European Long-Term Investment Fund), the EU has also made it easier for retail investors to invest in the European real economy in a targeted way.

With over 40 wind power and solar plants in its portfolio and over one billion euros in fund assets, the klimaVest investment fund from Commerz Real is the biggest ELTIF on the German market – after less than three years since its launch. Broadly diversified across locations and technologies, the sustainably oriented fund offers retail investors a long-term investment in the renewable energies segment, with a target return of 3.5% to 4.5%.

In this way, klimaVest is making a measurable contribution to the European energy transition – and is offering investors entry into the asset class of tomorrow today.