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Renewable energy returns outpace fossil fuels over past decade: study

Highlights

Renewables see 367% greater total return than fossil fuels

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London — Investment returns from renewable energy were triple those of fossil fuels over the last decade, according to a joint report by the UK's Imperial College and the International Energy Agency.

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The analysis examined the investment case for renewable energy and highlights a structural trend towards a lower-carbon global economy.

"Our research demonstrates that all over the world renewable power has outperformed fossil fuels," said Dr Charles Donovan, executive director of the Centre for Climate Finance & Investment at Imperial College Business School.

"It's been the same story for more than a decade, yet total investment is still lagging," he said in a statement March 18.

The study looked at the performance of publicly traded renewable energy and fossil fuel companies in four categories: global markets; advanced economies; emerging markets and developing economies; and China.

Across all portfolios, renewable power generated significantly higher total returns over the last 10 years, according to the study.

Annualized volatility of renewables was lower than fossil fuel portfolios in the global and advanced economies segment but higher than the fossil fuel portfolios in China and the emerging markets and developing economies category, it said.

"The analysis demonstrates a superior risk/return profile for renewable power portfolios in both typical market conditions and during global economic imbalances," Imperial said.

Most sustainable investment instruments in the market today do not have the breadth of these constructed portfolios and are unable to accurately reflect renewable energy returns versus fossil fuels over such an extended period, it said.

The research found that the correlation between renewable investment and economic growth fell during the recent COVID-linked downturn, indicating the potential for diversification benefits for renewables investors.

"Unprecedented economic volatility has led to deteriorating fundamentals within the energy sector as renewables portray greater resilience during the pandemic," it said.

Platts Atlas of Energy Transition