The Basics -101 of Renewable Energy
There is a lot of talk on renewable energy. But of course, “What is it?” This article introduces the world of renewable investing to you. 1
Renewable energy is increasingly shaping the global energy landscape as businesses, governments, and individuals move towards more sustainable solutions. Unlike fossil fuels, which are finite and contribute to environmental degradation, renewable energy is sourced from naturally replenishing resources such as sunlight, wind, water, and biomass.
Why Renewable Energy Matters
Renewable energy is not just an environmental solution—it offers substantial economic and operational benefits. Businesses that invest in renewable energy can lower costs, reduce exposure to price volatility, and enhance sustainability credentials. The increasing affordability of solar and wind power, along with innovations in battery storage and bioenergy, is making renewables more viable than ever.
Australia, in particular, is rich in renewable energy resources. As the Energy Council highlights, the country is already a leader in rooftop solar installations, with over 3.5 million solar PV systems installed as of late 2023. Many businesses are also integrating renewables through on-site generation or Power Purchase Agreements (PPAs), which allow them to source cheaper, cleaner energy directly from suppliers.
The Main Types of Renewable Energy
Solar Energy
Solar power remains the cheapest source of electricity worldwide, with widespread adoption across homes and businesses. Photovoltaic (PV) systems convert sunlight into electricity, which can either be used immediately or stored in battery storage systems for later use.
In Australia, solar power continues to expand rapidly. Government-backed resources, such as the Solar Consumer Guide, help businesses and individuals choose the right system to maximise savings. Battery storage solutions, particularly lithium-ion technology, enable more effective use of solar energy by storing excess power during peak generation times.
Wind Energy
Wind power has become one of the most cost-effective large-scale renewable energy sources. In Australia, wind energy contributes over 30% of renewable power generation, with continuous improvements in turbine design enhancing efficiency.
While on-site wind energy generation is less practical for most businesses compared to solar PV, large corporations are increasingly securing offsite wind energy through PPAs. This allows them to access consistent, low-cost renewable electricity without the need for major infrastructure investments.
Hydropower
Hydropower is an established and mature renewable technology that accounts for a significant share of Australia's clean energy mix. Traditional hydropower uses dams to generate electricity, while newer run-of-river systems offer a lower environmental impact.
The Snowy 2.0 scheme exemplifies the role of hydropower in energy storage, using pumped hydro to store and release electricity as needed. This type of infrastructure helps balance renewable energy supply and demand.
Bioenergy
Bioenergy is an economically and technologically proven method of generating energy from biological materials. Biomass can be burned for heat or converted into biofuels such as ethanol and biodiesel. Biogas, a mix of methane and CO₂, can also be captured and used for electricity generation.
Industries such as food processing, pulp and paper, and dairy manufacturing are increasingly turning to bioenergy to cut emissions and repurpose waste materials efficiently.
Geothermal Energy
Geothermal energy taps into heat from beneath the Earth’s surface to provide heating, cooling, or electricity generation. While not as widely adopted in Australia due to cost barriers, geothermal heat pumps are being integrated into buildings such as schools, hospitals, and hotels where stable underground temperatures provide heating in winter and cooling in summer.
The Growing Role of Renewable Energy in Industry
Businesses are not just adopting renewables to cut emissions—they are leveraging them for cost savings and operational stability. A prime example is Rio Tinto, which has announced a shift towards renewable energy for its aluminium smelting operations in Australia.
As a major industrial player, Rio Tinto is investing in large-scale solar and battery projects to replace coal-fired electricity at its Gladstone aluminium facilities. This move highlights how large corporations are actively transitioning towards low-carbon energy sources, aligning with global trends in sustainable industrial operations.
The Financial Side of Renewables
While the upfront investment in renewable energy systems can be substantial, various financing mechanisms are available:
Government grants and subsidies help businesses lower installation costs.
Power Purchase Agreements (PPAs) allow companies to buy renewable energy at lower rates without owning the system.
The Clean Energy Finance Corporation (CEFC) provides competitive financing for renewable energy projects.
Additionally, businesses that lack space for on-site renewable generation can partner with energy providers to secure off-site renewable energy at a fixed cost, reducing exposure to fluctuating electricity prices.
The Advantages of Renewable Energy
Lower Costs – Solar and wind energy are now cheaper than fossil fuel alternatives.
Energy Security – Renewables reduce dependence on imported fuels, increasing local energy resilience.
Environmental Benefits – Cutting greenhouse gas emissions supports global climate goals.
Job Creation – The renewable energy sector continues to expand, generating employment in installation, maintenance, and innovation.
Challenges and Considerations
Despite the benefits, renewable energy adoption presents some challenges:
Intermittency – Solar and wind energy depend on weather conditions, requiring energy storage solutions.
Infrastructure Upgrades – Many power grids were designed for fossil fuels and need investment to accommodate decentralised renewables.
Initial Costs – Despite long-term savings, upfront investment remains a barrier for some businesses.
Innovations such as renewable hydrogen, virtual power plants, and AI-driven energy trading are helping to address these issues, making renewables more practical and scalable.
The Bottom Line
Renewable energy is no longer just an environmental consideration—it’s an economic and strategic necessity. With costs falling, storage solutions improving, and industries actively shifting towards clean energy, renewables are reshaping the way businesses and households approach power consumption.
Australia’s natural renewable energy advantage, coupled with industry leadership from companies like Rio Tinto, signals a future where sustainable energy is not just viable but essential. The momentum behind renewables is unstoppable, and the businesses that embrace it today will be best positioned for the energy landscape of tomorrow.
References
1 Department of Climate Change, Energy, the Environment and Water, https://www.energy.gov.au/business/equipment-guides/renewable-energy
Important Information
EnviroInvest Pty Ltd ACN 685 107 957 (“EnviroInvest”) is an Authorised Representative of Daylight Financial Group Pty Ltd ACN 633 984 773 (“DFGPL”) which is the holder of an Australian Financial Services Licence (AFS Licence No. 521404).
Information in this commentary is current as at date prepared unless otherwise stated. However, please bear in mind that investments can go up or down in value, and that past performance is not a reliable indicator of future performance. For more Important Information please refer to the Disclaimer section of this website.
This communication may contain general financial product advice. It has been prepared without taking into account your personal circumstances, and you should therefore consider its appropriateness in light of your objectives, financial circumstances and needs before acting on it.
If our advice relates to the acquisition or possible acquisition of a particular financial product, you should obtain a copy of and consider the Product Disclosure Statement (PDS) before making any decision.