Switching to Green Energy May Save Trillions of Dollars

There is a general conception that, although switching to green energy is the right thing to do, it is not necessarily the cheaper option.  However, a recent study shows that switching to green energy sooner rather than later could save trillions of dollars by 2050.[1]  Thus, switching to green energy may make good business sense. 

How did the study come to that conclusion?

Declining Cost of Green Energy Technologies

The central premise underlying the study is that green energy costs will continue to decrease over time, making them cheaper and more economical than traditional fossil-fuel-based energy.  The estimated savings are before any costs associated with avoiding future potential climate disasters.

Fossil Fuel Costs Have Stagnated Over the Past Century

The study looked at the prices of fossil fuels for the past 100 years.  It found that after accounting for inflation and market volatility, the prices haven’t changed much.

While Green Energy Prices Have Dropped Rapidly

Green energy technologies do not have the history of fossil fuel, having only been around for a few decades.  However, the study found that with continual improvements in technology, their costs have fallen rapidly, at a rate approaching 10% per year.

The report also posited that the price of green energy will continue to fall in the future, making it cheaper than fossil fuels.  Their projections were based on how massive investment and economies of scale have made other similar technologies cheaper.

Additionally, continued research and investment in green energy is likely to resolve issues, including how to store energy produced by wind and solar and how to balance the power grid when technologies such as wind and solar are constrained by weather.

Green Energy is More Resource Intensive

Green energy technologies are materials intensive in that they require more materials than their fossil fuel-based counterparts.

For example, a typical EV requires six times the materials input of a conventional internal combustion engine vehicle, while an onshore wind plant requires nine times the materials needed for a gas-fired power plant.  Since 2010, the International Energy Agency (IAE) noted that the amount of materials required for a new unit of power generation has increased by 50% as the share of renewables has risen.[2]

Creating Investment Potential

As the use of green energy technologies expands, demand for rare earths and critical materials should increase, creating a potentially attractive investment opportunity for companies in their ecosystem.

How may investors gain exposure to companies involved in the rare earths and critical materials supply chain?

The Optica Rare Earths & Critical Materials ETF (CRIT)

The Optica Rare Earths & Critical Materials ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the EQM Rare Earths & Critical Materials Index.

The Index is comprised of global public companies deriving significant revenue from rare earths or critical materials in the production, recycling, processing, or refining of rare earths or critical materials.

[1] Fisher, Jonah, Switching to Renewable Energy Could Save Trillions – Study, BBC News, 9/13/22

[2] The Role of Critical Minerals in Clean Energy Transitions, International Energy Agency (IEA), May 2021