What are the advantages of wind energy and solar energy? Both are heavy hitters when it comes to cleaner methods of energy and power.
Wind power and solar power are considered the two primary choices for clean energy.
As clean technologies, both solar energy and wind power significantly decrease pollution and have minimal operational costs. These are attractive reasons to make the switch to clean energy solutions — but there's certainly more to wind and solar energy than that.
Here the Investing News Network provides a brief introduction to wind energy and solar energy, from the advantages of renewable energy to the future outlook for these clean energy technologies.
What are wind energy and solar energy?
Putting it simply, wind energy is the process of using the air flowing through wind turbines to automatically generate power by converting the kinetic energy in wind into mechanical power.
Wind energy can provide electricity for utility grids and homes, and can be used to charge batteries and pump water. The three main kinds of wind power are broken down as follows by the American Wind Energy Association:
- Utility-scale wind: Wind turbines bigger than 100 kilowatts that deliver electricity to power grids and end users via electric utilities or power system operators.
- Distributed wind: Wind turbines smaller than 100 kilowatts that are used to directly provide power to homes, farms or small businesses.
- Offshore wind: Wind turbines placed in large bodies of water, generally on the continental shelf.
Interestingly, wind energy can also be considered an indirect form of solar energy. That's because winds are widely described as being caused by the uneven heating of the atmosphere by the sun, the irregularities of the Earth's surface and rotation of the Earth.
Solar power is energy derived from the sun's rays and then converted into thermal or electrical energy.
According to the Solar Energy Industries Association, solar energy can be created in the following three ways: photovoltaics, solar heating and cooling and concentrating solar power.
- Photovoltaics: Generates electricity directly from sunlight via an electronic process to power small electronics, road signs, homes and large commercial businesses.
- Solar heating and cooling: Uses the heat generated by the sun to provide water heating or space heating and cooling.
- Concentrating solar power: Uses the heat generated by the sun to run traditional electricity-generating turbines.
What are the advantages of wind energy and solar energy?
With the basics of wind and solar energy in mind, let's look at the advantages of these two clean energy sources.
As carbon-free, renewable energy sources, wind and solar can help reduce the world's dependence on oil and gas. These carbon fuels are responsible for harmful greenhouse gas emissions that affect air, water and soil quality, and contribute to environmental degradation and climate change.
Aside from that, wind and solar energy can give homeowners and businesses the ability to generate and store electricity onsite, giving them backup power when their needs cannot be filled by the traditional utilities grid.
For example, during California's most recent wildfire season, large-scale utilities companies such as PG&E (NYSE:PCG) shut off power to tens of thousands of people in an effort to prevent fires like those linked to downed power lines. In cases like this, solar energy generated onsite could not only help fight climate change, but also act as a reliable backup source of energy.
Solar panel installations are easy to do and can also create energy bill savings. In some regions, users may qualify for tax breaks or energy rebates if they produce excess energy that can be delivered to the utility grid. In Canada, there are at least 78 clean energy incentive programs available that offer a combined total of 285 energy-efficiency rebates and 27 renewable energy rebates.
Both solar energy and wind energy are on the path to becoming the world's most affordable sources of energy.
"Land-based utility-scale wind is one of the lowest-priced energy sources available today, costing 1-2 cents per kilowatt-hour (kWh) after the production tax credit," according to the US Department of Energy. "Because the electricity from wind farms is sold at a fixed price over a long period of time (e.g. 20+ years) and its fuel is free, wind energy mitigates the price uncertainty that fuel costs add to traditional sources of energy."
The price of harnessing the sun's power is dropping each year due to technology advancements. In fact, the cost of residential photovoltaic solar power has slid from US$0.50 per kWh in 2010 to US$0.128 per kWh in 2020, according to US Department of Energy figures. The US agency estimates that solar costs will fall further to US$0.05 by 2030. On a grander scale, utility photovoltaic costs already sat at only US$0.045 as of 2020.
Future outlook for wind energy and solar energy
Looking ahead for wind energy, the Global Wind Energy Council estimates that 435 gigawatts (GW) of new capacity will be added from 2021 to 2025. Government support will be a key driver, giving way to market-based growth.
"The world needs to be installing an average of 180 GW of new wind energy every year to limit global warming to well below 2°C above pre-industrial levels," state the report's authors, "and will need to install up to 280 GW annually from 2030 onwards to maintain a pathway compliant with meeting net zero by 2050."
As for solar energy, the International Energy Association's (IEA) World Energy Outlook 2021 report pegs solar as now cheaper than coal. Along with wind energy, solar energy is expected to make up 80 percent of the global electric energy market by 2030. "Since 2016, global investment in the power sector has consistently been higher than in oil and gas supply," explains the IEA report. "The faster that clean energy transitions proceed, the wider this gap becomes, and as a result electricity becomes the central arena for energy-related financial transactions."
Lux Research predicts that the transition from fossil fuels to renewable energy sources will be accelerated by several years due to the impact COVID-19 is having on energy markets all over the world.
The firm notes that economic relief packages contain trillions of dollars for renewable energy technology research and development, and for the deployment of low- and zero-carbon infrastructure. By 2025, Lux sees COVID-19 resulting in accelerated investment in energy storage and power-generation projects.
Ways to invest in wind and solar energy
There are many investment opportunities in the renewable energy markets.
For investors interested in wind energy, there is the First Trust ISE Global Wind Energy Index Fund (ARCA:FAN), which was created on June 16, 2008. It tracks 50 holdings, including wind energy giants Vestas Wind Systems (OTC Pink:VWSYF), Boralex (TSX:BLX) and Siemens Gamesa Renewable Energy (OTC Pink:GCTAF), to name a few.
Our list of renewable energy stocks on the TSX may also be worth considering.
This is an updated version of an article first published by the Investing News Network in 2018.
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Securities Disclosure: I, Melissa Pistlli, hold no direct investment interest in any company mentioned in this article.
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