Two thousand four hundred gigawatts of renewable power are about to enter the market. This is roughly the capacity of the entire power generation in China.
It’s an estimate from the International Energy Agency (IEA), which tracks the adoption of green power worldwide. The agency expects massive growth in clean power generation by 2027 and beyond.
But while most investors envision vast amounts of new solar panels, wind, and hydro turbines, most are missing a vital part of this trend.
These power sources will be in remote areas.
No city centers will host industrial-scale solar farms or wind parks. Not to mention hydro turbines, which often harness power from falling or running water. These often work far from urban areas.
Cost is one reason why the new energy power production facilities are so far away. It’s cheaper to lease pieces of remote land.
But then operators need to transfer the energy to the main grid. And it takes more than regular wires to provide a steady connection.
Things are getting even more complex for offshore wind parks. These require special cables that can withstand salt water and extreme weather.
Industry insiders forecast rising demand for high-voltage direct current cables (or HVDCs) as a result. Their cumulative length will increase from 3,040 miles this year to 34,900 miles in 2035.
This Bottleneck Has Created an Opportunity
The clean energy sector has already faced a bottleneck in this field. A $3 billion project to connect the UK and Denmark has been delayed for four years. Mostly due to a lack of supply…
It became a real challenge to produce a specialized 435-mile seabed cable. There are not that many companies in the world that provide such services.
Cable makers are already calling this “the third electrical infrastructure revolution” in Europe. They are fully booked in the next few years with up to $20 billion of orders per year.
Even if most developed nations fund enough clean energy plants, the power transition infrastructure will remain a weak spot.
The new wind parks or solar farms may never deliver electricity to their final users without proper cable infrastructure.
As demand for HVDC copper heavy cables rises, so does their cost. This directly reflects the budgets for the new projects, which can make some of these uneconomical.
The companies making HVDC cables are planning to expand their capacity in the coming years. However, they face a headwind from the supply of the core metal going into these wires – copper.
The market will likely face a copper shortage with the massive expansion of cable-producing plants. By the middle of the decade, the copper shortage could amount to 3 to 5 million tonnes per year.
Some copper users started securing long-term supply directly from leading mining nations. Some have signed deals directly with state-run copper miners in Latin America just to make sure they will get enough metal to fulfill their contracts.
This trend will likely lead to higher metal prices in the coming years. Copper mining companies will be the first to benefit from this trend.
But they will not be the only ones… as the clean energy revolution accelerates, there will be other ways to play this and other trends shaping up the investment landscape in 2023.
Stay tuned to learn about other opportunities we have on our radar.
Thank you for your loyal readership,
The Financial Star team
