The summary below has been prepared for investors who have less time for a comprehensive analysis review. The goal remains unchanged—to present the sector in an accessible way, without digressions on politics or global warming. All information contained does not constitute a recommendation. Remember, you make investment decisions on your own and bear full responsibility for them.

Introduction to the Renewable Energy Sector

The renewable energy sector is characterized by environmental benefits related to the reduction of greenhouse gas emissions, while also enabling the diversification of energy sources, which is crucial for energy security. Despite challenges such as the need for efficient energy storage, forecasts indicate an increasing importance of renewables in the future.

The global renewable energy market, valued at nearly $928 billion in 2021, is dynamically developing, with projected growth to about $1.5 trillion by 2025. Market trends include the adoption of renewable energy, decreasing costs of renewable energy technologies, increased investments in related technologies, and the emergence of new companies and services in the sector.

Comparing renewables with traditional energy sources, differences include CO2 emissions, resources, costs, price stability, and policy. Although traditional energy sources still have a greater capacity for energy generation, forecasts suggest that by 2050, renewables could provide 50% of global energy, while the share of fossil fuels would drop to about 31%.

All these aspects suggest that the renewable energy sector has tremendous potential and will continue to develop, translating into the possibility of significant returns on investments in related technologies. However, traditional energy should not be dismissed, as despite current challenges, it can adapt to new conditions, becoming a cleaner and more efficient energy source.

Key Sectors

Wind energy is a dynamically developing sector, becoming increasingly competitive due to falling production costs. Technology development allows for more efficient energy generation and storage. Wind is currently divided into onshore (land-based) and offshore (sea-based) – the latter type is developing faster, offering greater potential and fewer spatial restrictions. Although wind energy faces challenges such as wind irregularity and location issues, significant growth is expected for it in the future.

Solar energy is one of the fastest-growing sectors, driven by technological progress, decreasing costs, and political support. The global installed capacity of photovoltaic panels is evidence of this sector’s growth. Expected reductions in PV technology costs and global efforts to reduce CO2 emissions contribute to the further growth of the solar energy sector.

Hydropower, despite its limitations, provides stable and predictable energy, which is a huge advantage. Small hydropower plants and innovative technologies have the potential to further develop this sector. Additionally, ocean energy is a sector with significant potential.

Geothermal energy, although on a smaller scale, uses heat from the Earth’s interior to generate electricity and regulate temperatures in buildings. Despite high initial costs, operating costs are relatively low after the installation phase.

The biomass and biofuels sector, utilizing organic waste for energy production, accounts for 2% of global energy production. Biofuels provide 3% of the world’s transport needs. This sector uses technologies for burning biomass or processing it into biofuels such as bioethanol, biodiesel, and biogas. In 2020, the biogas market was worth about $55 billion, with the United States and Brazil leading in biofuel production. The biomass sector has many other applications beyond energy.

Industry Challenges

Transitioning to renewable energy is a technological, economic, and political challenge. Electrifying transport, industry, and heating increases energy demand and generates infrastructure costs. Despite decreasing costs of renewable energy technologies, political and regulatory support is needed. The transformation must consider social justice and potential community resistance. Variable energy production from renewables requires solutions for energy storage and flexible power grids.

Renewable energy installations require complex transmission networks, which generate costs. Variability in renewable energy poses challenges for supply stability. Solutions may include smart grids and microgrids, but transformation requires significant investments. According to the IEA, investments in transmission and distribution networks may rise to about $460 billion annually by 2030.

Energy storage is key for renewables. Lithium-ion batteries have limitations, and other solutions are costly and complicated. Developing efficient storage technologies is a future challenge. According to BNEF, about $1.7 trillion will need to be invested in energy storage systems by 2030. The energy storage market has the potential to reach a value of $546 billion by 2035.

Geography influences the efficiency of renewable energy sources such as solar, wind, geothermal, and hydroelectric power. Transmission infrastructure is essential, especially for remote sources. Renewables may have environmental impacts, but they are less harmful than traditional sources. Technological innovations increase the efficiency of renewable energy use, and spatial planning helps balance energy needs and environmental protection.

Recycling in the renewable energy industry is crucial. Waste management from technologies such as solar panels, wind turbines, and lithium-ion batteries is becoming a priority. Developing recycling technology and infrastructure is necessary, and education and increased awareness about recycling are important. Innovations, like “design for end-of-life,” are essential for recycling efficiency.

Renewable Energy in the European Union

In line with the Green Deal initiative from 2019, the European Union (EU) aims to achieve climate neutrality by 2050 through transformation in areas such as energy, transport, agriculture, and finance. The EU aims to reduce CO2 emissions by 55% by 2030 and increase the share of renewable energy (RE) in the total energy mix to 40%. The “Fit for 55” package introduces legislative changes, including updates to the emissions trading system and directives on energy taxation, RE, and energy efficiency. The REPowerEU program and the EU ETS are key for energy supply security and emissions reduction. The transformation also includes construction and transport, with zero-emission standards and a ban on fossil fuel vehicles by 2035. All these initiatives create a range of opportunities for investors, especially in the renewable energy sector, although they also involve some risk due to market uncertainty.

Renewable Energy in the United States

The dynamic development of renewable energy sources (RE) in the USA, where the share of RE in electricity production rose from 9% in 2008 to 20% in 2021, opens up a range of attractive opportunities for stock market investors. Investments in RE have dominated the American energy market since 2010, with increasing emphasis on wind power plants. Two key factors drive this trend: the decrease in production costs of energy from RE and political support, especially President Biden’s “Clean Energy Revolution” plan. Companies such as NextEra Energy and Tesla are becoming attractive points of attachment for investors, especially in the context of global competition with the dominant Chinese market. The overall picture confirms the growing trend of replacing traditional energy sources with RE, suggesting that this sector will play an increasingly significant role in the American economy.

Renewable Energy in China

China, a global leader in the development of renewable energy sources (RE), has seen impressive growth in the share of RE in electricity production—from 7% in 2008 to 29% in 2021. This pace is driven by the decreasing costs of implementing projects, especially in the wind and solar energy sectors. Annual investments in the RE sector in China since 2010 have resulted in an increase in capacity of about 20 GW in wind power plants, and total investments in clean energy technologies amounted to $83.4 billion in 2019. Favorable political conditions and decreasing technology costs make this sector increasingly competitive against traditional energy sources. However, despite the dynamic development of RE, China still relies on fossil fuels. Nonetheless, China’s dominant position in the production of photovoltaic panels and the growing role of hydropower indicate attractive prospects for investors. Investments in Chinese RE, despite the risks associated with the dominance of coal energy and the country’s policies, may be an interesting proposition, especially in the context of accelerating the global energy transformation.

Renewable Energy in Japan

Japan, thanks to the intensifying development of renewable energy sources (RE), creates new opportunities for investors. Since 2008, the share of RE in electricity production has risen from about 10% to 23% in 2021, mainly using wind and solar technologies. The RE sector began to dominate energy investments after the Fukushima disaster in 2011, delivering an average of 7 GW of new capacity annually. Japan’s total investments in clean energy technologies amounted to $27.4 billion in 2019, placing the country third in the world. The development of RE in Japan is driven by decreasing production costs and favorable political conditions. The dynamic development of the industry and increasing employment, especially in the solar energy sector, indicate new opportunities for investors. Although nuclear energy has the largest share in energy production, RE is second, making this sector attractive to investors, combined with innovative technologies. Investments in water and geothermal energy are also significant in Japan. In the future, however, attention should be paid to the challenges associated with fully utilizing the potential of RE, such as the need to modernize the energy grid and overcome regulatory barriers.

Renewable Energy in India

The renewable energy sector in India, with a 35% share in the country’s energy mix by 2021. The pace of sector development is impressive, adding an average of 25 GW of capacity each year, especially in wind power plants. India has become one of the leaders in RE, with investments in clean energy technologies amounting to $50.8 billion in 2019. The development of the sector is driven by decreasing production costs, political support, and employment growth, which reached nearly 4 million workers in 2021, especially in the solar energy sector. Although coal power plants have the largest share in energy production, RE is in second place, and nuclear energy is third. Favorable market conditions, political support, and high potential in solar and wind energy make India an attractive place for investments in RE. Government plans aim to increase the share of RE in the energy mix to 40% by 2030. Companies such as Adani Green Energy, Tata Power Renewable Energy, and ReNew Power are noteworthy.

Raw Materials

Copper is a key component for the RE sector due to its conductivity, durability, and corrosion resistance. It is essential in wind energy, solar energy, and network infrastructure.

In wind turbines, copper is used in generators and other components, with consumption ranging from 4.7 to 9.5 tons per 3 MW turbine.

In photovoltaic technology, copper is a key component of solar panels and conductors, with a typical 1 kW solar panel containing about 5.5 kg of copper.

Copper is also important for wires and cables used in energy transmission and distribution, as well as in energy storage.

According to a 2020 IEA report, the development of RE technologies may lead to increased demand for critical raw materials such as copper.

Meanwhile, silicon, as the second most common element on Earth, is crucial in the production of solar panels, accounting for 95% of their composition. Currently, silicon consumption for the production of photovoltaic panels ranges from 5 to 10 million tons with a global installed capacity exceeding 1 terawatt (TW). IEA forecasts indicate a possible increase in installed capacity to 3 TW by 2030, suggesting a potential increase in demand for silicon to 15-30 million tons annually. However, due to the energy-intensive process of producing silicon and greenhouse gas emissions, it is important to optimize production and recycling processes, as well as develop alternative photovoltaic technologies.

Lithium is essential for lithium-ion batteries, used in renewable energy storage and electromobility. In 2021, 315,000 tons of lithium were used, and demand may rise to 1.3 million tons by 2030. Increased demand is associated with environmental challenges, such as water use and CO2 emissions. Lithium-ion batteries dominate the energy storage market and are crucial for electric transport. The largest producers of lithium are Australia, Chile, and China. Innovations, such as battery recycling and alternative technologies, are important for sustainable lithium use.

Hydrogen is crucial for the future of clean energy, with a particular focus on “green hydrogen,” produced through electrolysis powered by renewable energy. IEA forecasts indicate increasing demand for hydrogen—from about 70 million tons in 2020 to nearly 80 million tons annually by 2030. Challenges include the need for large infrastructure for hydrogen storage and transport, as well as the costs of producing green hydrogen. The development of technologies and regulatory frameworks will be key.

Renewable Energy on the Warsaw Stock Exchange

Sunex

is a manufacturer of technologies related to renewable energy sources (RE), such as heat pumps, photovoltaic mounting systems, and integrated systems combining various energy-related technologies. Their product range includes heat pumps, solar panels, solar collectors, thermosyphons, storage tanks, pump groups, and hybrid systems combining these products. Over 60% of their production is sold abroad, mainly in European Union countries.

During the General Meeting of Shareholders on May 30, a decision was made to pay a dividend for 2022 at the rate of 0.28 PLN per share. The dividend entitlement day is July 18, and payment is planned for July 26.

In the future, Sunex plans to develop integrated products for households that combine energy production and storage with maintaining thermal and hygienic comfort. The company is also considering using hydrogen for energy storage in RE systems and plans to acquire foreign entities in the coming years.

Financial data for the company shows growth in both revenue and net profit in recent years. In 2022, revenues amounted to 289,522 thousand PLN, net profit was 38,990 thousand PLN, and EBITDA was 55,454 thousand PLN. Profitability and debt ratios have also improved compared to previous years.

ML System

is a manufacturer of photovoltaic installations and sustainable solutions based on these installations for the construction and automotive sectors. The company offers integrated photovoltaics (photovoltaic facades, roof tiles), smart city solutions (lighting, bus stops, charging stations powered by solar energy), and glass converting solar energy into heat or electricity. The company holds over 16 patents for its innovative technologies.

Currently, the company is actively raising capital for planned investments. In June, it raised more than 59 million PLN from a share issue, and later signed a loan agreement with ARP for up to 41 million PLN.

ML System plans to expand its product range to include products based on quantum technology, including photovoltaic roof tiles and facade panels. The development of these products is motivated by new European Union regulations and is to be implemented in 2023-2024 for a sum of 120 million PLN.

Financial data for the company shows revenue growth in recent years, although net profit in 2022 was small (215 thousand PLN). In 2022, revenues amounted to 281,664 thousand PLN, EBITDA was 36,505 thousand PLN, and net debt was 257,724 thousand PLN. Profitability and debt indicators suggest that the company is undergoing a period of intense development, which involves large investments.

Photon Energy

is a capital group consisting of 56 entities operating in European Union countries and Australia. The group specializes in photovoltaic systems, providing services from design, through construction, to operation. Most of the group’s revenues come from energy production from its own solar power plants. Additionally, Photon Energy trades photovoltaic systems, offers design, construction, and operational services for solar farms, and services related to well construction and water treatment.

On June 7, the group concluded a six-month program to repurchase its own shares with a total value of 3.2 million PLN.

Photon Energy plans to consolidate the RE market to become an entity comprehensively serving the entire energy value chain. As part of this strategy, the group acquired the virtual power plant Lerta, a company operating in the energy trading and management market, holding 6 commercial licenses on European energy markets.

Revenues for the company have grown in recent years, although net profit was negative in 2019-2021, while in 2022, a net profit of 12,532 thousand PLN was achieved. In 2022, revenues amounted to 424,003 thousand PLN, EBITDA was 105,763 thousand PLN, and net debt was 712,620 thousand PLN. Financial indicators suggest that the company is in a phase of intensive development and investment.

Polenergia

is the largest vertically integrated energy group in Poland. The group’s activities include generation, distribution, trading, and sales of electricity, using wind farms, photovoltaic and cogeneration gas plants. Polenergia has also recently expanded its offerings to include heat pumps and electromobility solutions.

Currently, Polenergia is implementing the construction of the first offshore wind farms in Poland, with a total capacity of 3,000 MW.

In response to future European Union regulations, Polenergia plans to expand to Central European countries with a similar energy structure. The group is also developing gas energy, with plans to replace gas with hydrogen in the future, aiming to make Polenergia a key producer of green hydrogen.

The company’s revenues have significantly increased in recent years, reaching 7,089,231 thousand PLN in 2022. Net profit in the same year was 159,918 thousand PLN, and EBITDA was 354,024 thousand PLN. Net debt was 1,458,103 thousand PLN.

Foreign Companies

NextEra Energy

is a key provider of green energy in the USA, specializing in the production, transmission, and distribution of energy from various sources, such as nuclear, wind, and solar power. Serving over 12 million retail customers, the company uses gas power plants to produce 45% of its energy, with 53% coming from renewable sources. In 2022, the company closed its last coal power plant.

The company’s subsidiary, Florida Power & Light Company, recently reduced electricity prices for its customers. The company also plans to increase its production capacity through investments in new wind and solar farms, aiming to achieve zero emissions by 2045.

Financial analysis of the company shows steady growth in revenues, net profit, and EBITDA from 2019 to 2022. The company’s net debt has also increased, but financial ratios, such as C/WK, C/Z, and D/E, have generally improved.

Iberdrola, S.A.

is a Spanish energy giant founded in 1992. Present in 12 countries across 4 continents, the company serves over 30 million retail customers. It offers the generation, transmission, and distribution of electric energy, with a dominance of green energy, which accounts for 57% of its capacity. Iberdrola uses multiple energy sources, such as wind, water, sun, gas, and nuclear, with a total capacity exceeding 60 GW.

Currently, Iberdrola is implementing a 3-year development plan worth 47 billion euros. The plan primarily includes network development (55% of funds) and increasing green energy production (35% of funds).

In the future, Iberdrola plans to increase its generation capacity to 100 GW by 2030, involving investments of around 70 billion euros. Additionally, it plans to increase the share of renewable energy sources to over 80% of total production.

Financial analysis of the company shows steady growth in revenues, net profit, and EBITDA from 2019 to 2022. The company’s net debt has also increased, but financial ratios, such as C/WK, C/Z, and D/E, have generally improved. The ROI remained at 5.9% in 2022, comparable to 5.9% in 2021.

Ørsted A/S

is a Danish energy giant specializing in the construction of offshore wind farms. As a world leader in this field, the company, whose majority shareholder is the Danish government, has a history dating back to the 1970s. Since 2008, Ørsted has been transforming towards clean energy production, with 90% of its production currently coming from renewable sources. The company controls 49% of the energy market and 35% of the heat market in Denmark and is present in markets in Germany, Sweden, the Netherlands, Norway, the United Kingdom, and the USA.

Recently, Ørsted acquired the American company Deepwater Wind, providing energy for nearly a million people on the east coast of the USA. The company plans to increase production there to 6 GW.

Ørsted’s future plans include producing 15 GW of energy annually by 2025 and 30 GW by 2030. The company also plans to increase its share of electricity production in Denmark from the current 49% to 95% in 2023 and 99% in 2025.

Financial analysis of the company in million DKK shows growth in revenues, net profit, and EBITDA from 2019 to 2022. Financial ratios, such as C/WK, C/Z, and D/E, have generally improved, and ROI increased from 4.9% in 2020 and 2021 to 6.0% in 2022.

Longi Green Energy Technology Co., Ltd.,

founded in 2000, is a Chinese company recognized as the world’s largest producer of monocrystalline silicon wafers and solar cells. The company is also a contractor for large-scale photovoltaic power plant projects and hydrogen installations, with 15 production bases and over 30 branches worldwide. Last year, Longi produced 85 GW of silicon wafers, half of which were sold, and the rest were used for its own projects. Longi is known for investing in research and development, which has allowed the company to obtain over 2,000 technological patents.

At the beginning of 2023, the company signed a letter of intent regarding the construction of another factory in China, which is to increase Longi’s production capacity to 190 GW of silicon wafers and 100 GW of solar cells.

Longi has ambitious plans for the future, which include developing large-scale hybrid systems combining solar and hydrogen technologies. In April 2023, the company won a tender for a solar-hydrogen project worth $1 billion.

Financial analysis of the company in million CNY shows that revenues, net profit, and EBITDA have significantly increased in 2019-2022. The C/WK ratio dropped from 9.83 in 2021 to 5.20 in 2022, and the C/Z ratio also dropped from 51.0 in 2021 to 21.7 in 2022. ROI slightly decreased from 19.4% in 2021 to 14.0% in 2022.

ETFs

iShares Global Clean Energy ETF (ICLN) is the largest exchange-traded fund (ETF), focusing its investments on the global renewable energy market. Created by BlackRock, the fund replicates the S&P Global Clean Energy Index, consisting of about 100 companies from various renewable energy sectors. The fund has net assets worth approximately $4.35 billion.

Typically, 80% of the fund is invested in stocks of companies listed in the index, and the remaining funds may be invested in various financial instruments, such as futures contracts or options.

The fund’s largest exposure is concentrated on companies such as First Solar Inc, SolarEdge Technologies Inc, Enphase Energy Inc, Consolidated Edison Inc, Vestas Wind Systems A/S, Iberdrola SA, Orsted A/S, China Yangtze Power Co Ltd, EDP – Energias de Portugal SA, and Ormat Technologies Inc.

The fund’s expense ratio is 0.40%, and the dividend is 0.96%. The average daily trading volume is 2,713M. The annual return of the fund in 2022 was -5.41%, down -24.18% in 2021, but in previous years, it achieved 141.8% in 2020 and 44.35% in 2019.

First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) is a fund established in 2007 by First Trust Advisors L.P. The fund aims to replicate the investment results of the NASDAQ Clean Edge Green Energy Index, encompassing a broad spectrum of companies from the renewable energy sector listed on the US stock exchange.

Companies that are part of the QCLN portfolio are engaged in various segments of the renewable energy sector, including production, distribution, and installation in subsectors such as rare materials used for clean energy production, energy management systems, energy storage and conversion, and energy generation from renewable sources. These sectors together account for 94% of the entire fund.

The fund manages assets with a total value of nearly $1.5 billion. The largest weight in the portfolio is held by stocks of companies such as ON Semiconductor Corp, Tesla Inc, First Solar Inc, Enphase Energy Inc, Albemarle Corp, SolarEdge Technologies Inc, Lucid Group Inc, Rivian Automotive Inc, Brookfield Renewable Partners LP, and Allegro Microsystems Inc.

The fund’s expense ratio is 0.58%, and the dividend is 0.43%. The average daily trading volume is 133152.7. The annual return of the fund in 2022 was -30.37%, but in previous years significant gains were recorded: -3.21% in 2021, 183.98% in 2020, and 42.65% in 2019.

Invesco Solar ETF (TAN) is a fund established by Invesco in 2008, aiming to replicate the investment results of the MAC Global Solar Energy Index. This index encompasses companies from the solar energy sector, including both energy producers and suppliers of technology and equipment used for its production.

From a geographical perspective, about half of the companies in which the fund invests operate in the US market, while the rest are mainly companies from China (20%) and Europe (15%). The fund invests at least 90% of its assets directly in securities included in the base index.

TAN manages assets with a total value of approximately $2 billion. The largest share in the portfolio is held by stocks of companies such as First Solar Inc, SolarEdge Technologies Inc, Enphase Energy Inc, Xinyi Solar Holdings Ltd, Sunrun Inc, GCL Technology Holdings Ltd, Shoals Technologies Group Inc, Array Technologies Inc, Meyer Burger Technology AG, and Canadian Solar Inc.

The fund’s expense ratio is 0.69%, and the dividend is 0%. The average daily trading volume is 605447.7. The annual return of the fund in 2022 was -5.24%, down 25.1% in 2021, but previously the fund achieved impressive results, with an annual return of 233.95% in 2020 and 66.53% in 2019.

First Trust NASDAQ Clean Energy Smart Grid Infrastructure Index Fund (GRID) is a fund established by First Trust Advisors L.P. in 2009. The fund aims to replicate the investment results of the Nasdaq Clean Edge Smart Grid Infrastructure Index, which includes companies from the grid and energy infrastructure sector.

Most of the companies in which the fund invests operate in the American (50%) and European (40%) markets. These are enterprises involved in electric grids, production of electrical equipment, energy storage, energy flow management, and software production used by the infrastructure and smart grid sectors.

The value of the fund’s portfolio is below $800 million. The largest share in the portfolio is held by companies such as ABB Ltd, National Grid PLC, Schneider Electric SE, Eaton Corp PLC, Johnson Controls International PLC, Quanta Services Inc, Samsung SDI Co Ltd, SolarEdge Technologies Inc, Enphase Energy Inc, and NVIDIA Corp.

The fund’s expense ratio is 0.58%, and the dividend is 1.07%. The average daily trading volume is 73668.6. The annual return of the fund in 2022 was -13.89%, but in previous years the fund recorded positive results: 27.64% in 2021, 48.82% in 2020, and 42.83% in 2019.

Summary

The Renewable Energy Sector is currently in dynamic development, with an estimated market value of $928 billion and projected growth to $1.5 trillion by 2025.

By 2050, RE could provide up to 50% of global energy, reducing the share of fossil fuels. The sector offers attractive investment opportunities, but challenges such as variable energy production, complex transmission networks, and infrastructure costs must be considered. Waste management is becoming a priority, opening new investment opportunities.

The development directions of the RE sector vary in different regions of the world, each offering unique investment opportunities. Despite the challenges, the RE sector has the potential for further development and is an interesting investment idea. The condition for success of any investment is that investors make informed and balanced investment decisions.