Every year, the planet exceeds the amount of earth’s natural resources we should be using in a year. This is measured by the Earth Overshoot Day, which occurs when humanity’s demand on nature exceeds Earth’s biocapacity.
This year, Earth Overshoot Day falls on 2 August, whereas 40 years ago, all the earth’s natural resources were used up by 25 December. As the world is using up the earth’s natural resources at a quicker pace, it is important to keep renewing the resources we have already used.
When it comes to renewables, regulation is key. In July 2021, the European Commission proposed to increase the bloc’s renewable energy target for 2030 from 32% to 40%. The target was further increased to 45% in May 2022 in the REPowerEU Plan to reduce dependence on Russia and accelerate the energy transition, which would require additional investment needs towards renewables capacity.
Europe’s Green Deal Industrial Plan, announced in early 2023, looks to extend and accelerate funding for the net-zero industry in Europe; major goals of the plan include the rollout of renewables and the transformation of energy and transport infrastructure such as grids. It calls out infrastructure as key to the net-zero business environment it seeks to establish, and the push for charging and refuelling infrastructure, hydrogen, and smart electricity grids it calls for will benefit regulated utilities.
Across the pond, the Inflation Reduction Act is just getting off the ground as utilities and renewables invest in electrification, thereby increasing their growth profile.
Investment opportunities
These policies pave the way for investment in renewables. For example, there are several utility sub-sectors that are instrumental in helping with the energy transition and can help potentially move the Earth Overshoot Day forward.
Regulated gas utilities such as Enagas have a pivotal role in the REPowerEU Plan. Enagas engages mainly in the transport, storage, and regasification of natural gas in Spain. It is a natural monopoly in gas transport and has the largest share of regasification in Spain. Enagas’ latest strategic plan includes investments in the development of renewable hydrogen storage facilities and projects for the transmission and connection of hydrogen throughout Europe.
Another notable example in the renewables space is the integrated electric utilities company Iberdrola, which is a multinational integrated electric utility company headquartered in Spain, with renewables generation as well as regulated electricity transmission and distribution networks as part of their offering. Iberdrola was one of the first companies to recognise the scope of the opportunity in renewable generation. Through sustained investment, it has become one of the largest wind power operators in the world and a key driver in the renewable space.
Utility-scale solar activity is key in leading the renewables charge. It typically generates solar power through large farms of ground-mounted photovoltaic solar panels and sells it directly onto the electricity grid. Companies capturing value in the US utility solar industry include those providing associated components of the projects, such as electric balance of systems components (cable and connector assemblies and fuses) and companies that make trackers and software for ground-mounted solar projects that lets the panels align with the sun throughout the day.