Electric power is one of the largest and most crucial industries, and the disruption currently taking place in the industry via green energy is a great opportunity for businesses to make a profit while helping the environment.
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According to the International Energy Agency’s Renewables 2020 report, renewable power capacity worldwide is expected to rise to 200 Gigawatts in 2021, which is a new record. Solar, along with hydropower and wind, is contributing to most of this increase, with solar alone climbing by more than 30 percent in large markets like China, the U.S., India and the European Union. Smaller countries are also seeing significant increases in adoption, leading to forecasts that renewables will be the largest source of electricity generation worldwide by 2025.
Why is this rise happening despite the disruption of the past year and reduction in business activities across the world? Here are three reasons — and the opportunities they pose for entrepreneurs.
1. Government investment
The first factor that drives the rise of green energy is that governments around the world are making a concerted effort to phase out fossil fuels and shift their populations to green energy. In the U.S., for instance, the new administration has begun to execute on a platform that includes rejoining the Paris Climate Accord, investing $2 trillion in clean energy and fully decarbonizing the power sector by 2035 to achieve a larger goal of net-zero carbon emissions by 2050, according to a Deloitte report.
They’re doing this in two ways. First, they’re establishing infrastructure for power generation and distribution, and second, they’re incentivizing the private sector to do so through tax credits, subsidies and other programs that ensure the profitability of green-energy initiatives. Tesla, for example, still receives the bulk of its profits from selling its energy credits, rather than cars. For entrepreneurs, this means that now is a great time to explore businesses that promote innovations in green energy by providing software or hardware solutions to optimize green energy and reach the government’s set targets.
2. Reductions in price
Historically, one of the barriers to the adoption of green energy by many households was that doing so would typically cost more than simply sticking with the norm. In recent times, several technological advancements have served to reduce the price of green energy drastically, bringing it within the realm of affordability for more households. In 10 years, the price of solar electricity dropped by 89 percent, and the price of onshore wind dropped 70 percent.
This change is visible in the spike in the number of homes that now have some sort of solar solutions installed. As more people moved to their homes for full-time work during the pandemic and afterward, the usage of those home solar installations increased, and more people got theirs installed to take advantage of the reductions in price and the solar incentives from the federal and state governments. This surge has naturally led to an expansion of the value chain as more people installing solar systems means more distributors, retailers and installers, thus expanding the opportunities in the space for entrepreneurs.
Related: Going Solar at Home
3. Sustainability mindset
One of the side effects of the pandemic has been that people are now more conscious of the environment and sustainability in general. Whether that’s because people were forced to confront their mortality or just because we had more time to read about environmental issues during lockdown is an open question, but there’s definitely been a surge in consciousness about sustainability worldwide. As stated in this Harvard Business Review report, 65 percent of survey respondents said they want to buy purpose-driven brands that advocate sustainability.
The implication of this is that businesses that are able to show how their products help the environment will have an edge when it comes to converting customers. There’s simply no other industry that has as much potential to reverse the damage to the environment as renewables, given that the use of a solar system for 25 years will eliminate nearly 300,000 pounds of carbon-dioxide emissions, according to Smart Solar Energy Co. That makes it a prime sector in which to leverage the sustainability sentiment to boost sales.
Renewable energy has been around for a long time, but it’s only now coming into its own, accelerated by government initiatives, technological innovations that facilitate scalability and reduce price, and an increase in sustainability consciousness among consumers. Businesses must strive to incorporate sustainability into their strategies to optimize their operations (especially marketing) and boost their bottom lines.