The Spectacular Returns on Renewable Energy

Since the start of the industrial revolution, the world’s most advanced economies have operated on increasing amounts of fossil fuels. As their appetites for coal, oil and natural gas grew so did the profits of companies that extracted these commodities from the earth and sold them as fuels. That is, until recently.

Today these depleting, ecologically hazardous fuels face new competition from companies that offer safer, greener energy with higher net energy returns on investment (EROI). Although lacking the political influence of the world’s large fossil fuel companies, these corporate pioneers have proven their worth by generating substantially larger returns to investors.

The following table, excerpted from my forthcoming book on Economies That Mimic Life, shows the returns of seven Nordic clean energy leaders relative to the Standard & Poor’s Global Oil Index, which includes 120 of the world’s largest publicly-traded oil companies.

Incredibly, during a decade in which Global Oil Index companies lost shareholder value, average returns for the Nordic renewable energy pioneers were 429 percent – a return that comfortably exceeded the S&P 500 Index (342.8%).

The company that generated the highest returns (Neste) converts bio-wastes from farms, food processors and rendering plants into bio-diesel and jet fuel at three large refineries in Finland, Holland and Singapore. As global demand grows for cleaner, low carbon fuels, Neste stands out as the technology leader in this field.

Tomra, which generated the second highest rate of return on the foregoing chart, is valued for its low-carbon, energy-saving sorting and recycling technologies, which enable corporate and municipal customers to generate bio-gas from the organic residues of their recycling processes. Since recycled materials reduce the need to extract resources from Nature, Tomra’s technology is a high-leverage solution to reducing global demand for fossil fuels.

Vestas, the world’s leading producer of giant wind-generators, and Ørsted, the world’s largest provider of offshore wind farms, often work together as partners. The value of their offers resides in the high EROI of their tallest generators, which yield roughly 25 times more energy than is expended on producing and maintaining them over their lifetimes. Thanks to the ‘cube rule’ of wind power (whereby the power available from high altitude wind generators varies as the cube of wind speed), that is double or more the EROIs on fossil fuel energy. [2]

Novozymes is a critical player in Nordic bio-energy technology because their enzymes make it possible to render bio-wastes into bio-fuels. This has been a great benefit to UPM, a forest company, which can now convert wood molecules into bio-diesel. Neste and Ørsted also partner with Novozymes in creating bio-fuels.

Fortum joins the list of Nordic renewable energy leaders because its smart-grid networks, battery storage facilities and bio-fuel investments enable electricity to be produced and consumed locally rather than relying on more vulnerable centralized sources of power. This creates space for local development of wind, solar and biomass renewable energy, which is increasingly the most economic solution to the planet’s growing energy appetite.

The data and conclusions of this analysis conflict markedly with the conventional wisdom of Wall Street, Washington and the mainstream media, which continue to favor fossil fuel exploration and investing. Yet the market clearly sees things differently. Because the EROIs of fossil fuel companies are dropping as reserves become depleted and harder to exploit, and those of renewables are rising as they become more technologically advanced, it is time to re-think our economic and investment strategies as they relate to energy.

[1] Although Orsted (formerly DONG Energy) was founded in 1972, it was primarily government-owned until 2017, when it had its initial public offering. For purposes of this chart it therefore has only a one-year trading history.
[2] Ida Kubiszewski et al. “Meta-Analysis of Net Energy Return for Wind Power Systems.” Renewable Energy 35 (1) January 2010. Pages 218-225.

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