The process of decarbonization and the set goals of almost 50 percent of energy by 2050 to be from renewable sources are factors that drive the investments in renewable energy sources. It is estimated that about $100 trillion will be invested in this process over the next few decades. Investments that will provide more renewable energy from sun, wind, and water, but also investments that will cause complete changes in societies and economies. The transformation of the economy is already happening at an accelerated pace.
A few years ago, it was innovative and avant-garde to invest in the renewable energy sector, today the situation is different. Investing in green energy is a general trend today because all companies, governments, and organizations want to show social responsibility and contribute to the green agenda.
The global economy is largely focused on investing in renewables because, in addition to the ethical moment and efforts to accelerate the decarbonization process, there is another motive that accelerates the energy transition to renewable energy. And that is of course the money. Companies are increasingly motivated to invest in renewable sources for their own needs because that way they get cheap energy, and at the same time contribute to the decarbonization process. This motive is increasingly accelerating the investment process, especially in EU countries, as the war in Ukraine has led to a dizzying jump in fossil fuel energy prices, which is a major blow to the economy. Of course, this wave of rising energy prices has not bypassed other world markets either.
Hence this is an additional incentive for companies to invest in renewable energy sources, as it increases their competitiveness and market sustainability. For some companies that are energy-intensive in their production, these investments are also a matter of survival.
But apart from the fact that investing in new sources of renewable energy is a general trend, this sector is becoming really attractive for investment and good earnings. A quarter of the total energy is currently produced from renewable energy sources, that is from sun, wind, and water. The green energy sector has had an annual growth of 8% in recent years, and due to several reasons, investments in this sector are higher. Last year, the US Senate adopted a $ 1.2 trillion investment package for renewable energy and energy transition.
Investors are interested in the renewable energy sector due to the fact that this is where the biggest technological innovations are created, which makes the opportunity for profit even greater. Institutional support certainly provides an additional incentive for investment in this sector.
The trend of investments in renewable energy sources and free capital markets signals a good opportunity for earnings. The shares of NextEra Energy, Brookfield Renewable, Clearway Energy, First Solar, and SolarEdge Technologies are the best examples of good earnings and return on investment. The total market value of these companies is estimated at almost 219 billion dollars. In addition to the continuous growth of profits and investments, these companies have created real value for their shareholders. Average earnings per share since 2005 have grown by 8.7%, while dividend growth has grown by almost 10%.
There is no doubt that the world will be in great need of renewable energy in the next period. The cycle of investments in new sources and new technologies will continue, and that is good news for investors. Investments in new technologies, especially in energy storage and transmission as well as other alternative solutions are already an important industry that is high on the map of investors. According to the ways, investors usually choose to invest in renewable energy sources through direct investments, investing through funds, or investing in shares of companies from renewable energy sources. However, the dynamics of this sector also depend on the growth of the global economy and the easing of regulation. Although this part of the regulation is being improved on a daily basis, it is still necessary to work on facilitating bureaucratic procedures.