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Higgins Capital Management, Inc.

The Future of Green Energy Investing

The past decade witnessed an unprecedented surge in investments in renewable energy sources such as solar, wind, and other green technologies. Driven by concerns about climate change, falling costs, and supportive government policies, global investments in the renewable energy sector reached over $350 billion in 2021. However, there are growing signs that the green energy investment boom may have peaked as the sector faces slowing growth, supply chain challenges, shifting market dynamics, and a growing global political backlash against the green movement.

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One key indicator that green energy investing has topped out is the slowing rate of year-over-year growth. While annual investments rose at a rapid pace through the late 2010s, exceeding 20% growth some years, the rate of increase has moderated significantly to the single digits over the past couple of years. 2022 saw renewable energy investments rise less than 5% to $365 billion, the slowest growth in a decade besides a small dip during the pandemic year of 2020. This deceleration suggests that after years of exuberant growth, the green energy sector is maturing and entering a phase of slower expansion.

Additionally, renewable energy is facing more competition from traditional fossil fuels as oil and natural gas prices have fallen significantly from their 2022 peaks. Cheaper fossil fuels make it harder for solar and wind to compete on cost in the near term. While most analysts believe the long-term trend still favors a transition to low-carbon energy, the renewed economics of oil and gas could sideline some green energy projects and investments in the coming years.

Most significantly, the entire green movement is facing a growing political backlash from voters worldwide who are increasingly skeptical of climate change policies and the costs they impose on consumers and businesses. In recent years, there have been widespread protests against carbon taxes, renewable energy mandates, and other green policies in countries like France, Australia, and Canada. Many voters view the green agenda as an elite-driven movement that prioritizes environmental concerns over economic growth and affordable energy.

This political shift is putting pressure on bureaucrats and elected officials who have previously acted with autonomy and impunity in pushing aggressive climate policies. In the U.S., several states have rolled back renewable energy mandates and subsidies in response to voter opposition. The European Union has faced challenges in implementing its "Green Deal" agenda as some member states balk at the costs and regulations involved. Even in China, the government has moderated its push for electric vehicles and renewable energy as it prioritizes economic recovery and energy security.

The information contained in this Higgins Capital communication is provided for information purposes and is not a solicitation or offer to buy or sell any securities or related financial instruments in any jurisdiction. Past performance does not guarantee future results.

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