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by Finage at February 10, 2023 6 MIN READ


Role of Renewable Energy in Shaping the Future of Commodity Trading


In a financial world in which many participants are trying to make a bank, it is more than advised to possess multiple streams of income. Some choose to go the route of Forex or cryptotrading which has become increasingly popular.


One such way is commodities trading which in some areas, is often acknowledged as a less risky route. As it stands, one major sector that has seen a lot of interest is energy, which is trying to incorporate greener, more renewable energy into the mix. So, how exactly does this evolution in the energy sector affect trade and what will it look like going forward?



- Commodity trading in 2023

- The current state: can such commodities work in a state of inflation?

- The story of green energy

- The role of green energy in this trading going forward

- The role of tech in green energy trading

- Green energy's effect on prices

- Final thoughts


Commodity trading in 2023

This type of trading is the process of buying and selling of raw materials and the products they form. When you think about it, it's by far the most tangible of any form of trade because the created goods are raw materials or primary products that are consumed by different  industries and individuals. The key areas of this form of trading include:

- energy (such as crude oil and natural gas),

- industrial metals (such as copper and aluminum),

- agricultural (such as wheat or corn, making bread, cereal or animal food),

- precious metals (such as gold and silver).


So commodity trading involves the buying/selling of raw materials or primary products that are traded on the global markets. The tangible nature of this practice is such that it isn’t as volatile as the crypto or Forex varieties, as it's not as dependent on user sentiments. Characteristics of this kind make commodity trading perfect for hedging as well as portfolio diversification.


Also it involves different niches of trading as: 

- Market analysis

- Trading strategy

- Risk management

- Trading platforms usage

- Regulatory compliance

- Market access

- Supply chains


In 2023, the increasing use of renewable energy has been transforming the world of commodity trading. Renewable energy sources such as solar, wind and hydro power are becoming more popular. Basically, producing electricity is leading to a shift away from traditional fossil fuels. It shapes the future of renewable energy in commodity trading as it is also influenced by the development of new tech.


By the way, renewable energy helps to diversify and decentralize energy markets. Due to energy sources that are produced in a local area, communities can be less reliant on traditional sources of electricity. In turn it leads to new market development for commodities. for example, batteries.


The current state: can such commodities work in a state of inflation?

Sure, 2022 saw the state of this space be impacted by global instability, which led to inflation. The fuel industry in particular suffered with the lack of natural gas in Europe, including potential issues and risks with China (affecting the overall demand curve). However, thanks to the supply chain, the experts expect that the commodities can properly work, including the demands for it so they are pretty stable.


The current state of commodities trading looks rather promising, not because prices of goods are magically dropping. Rather, it's because the economy is catching up to the events of last year, which means things are set to reset going forward. As well the population is growing, bringing the demand to a higher level, so the production is increasing everywhere.


The story of green energy

Anything thought of as green or renewable is such that it won’t run out no matter how excessively it’s used. Energy is mainly associated with the terms, which has ramped up quite a bit as the future of the sector has garnered some serious interest. As opposed to gas or coal, renewable energy sources people are looking to go after include:

- hydrogen

- solar power

- wind power

- hydroelectricity

- bioenergy 


Currently, there are many solar and wind fields as well as hydroelectric dams spread all over the globe and they are functional enough to provide electricity for millions of people. That said, such renewable energy isn't as cheap or viable in the farthest reaches of the planet. As such, the green revolution is yet to catch fire to that extent.


However, many initiatives exist that allow for better education on the subject, which means that more people are getting behind it by the day. The moment we see the true integration of green energy into daily life is the time to realize that the market will follow suit.


The role of green energy in this trading going forward

Green power as a commodity is quite interesting and has a lot of potential, which is something it holds over natural gas which is finite as it only has so many uses. This potential alone is enough to get into it early, as inflation is bound to play its role, and as prices go up, so will returns. The demand for it is also skyrocketing, which has placed a lot of impetus on creating the technology necessary to advance the field.


There is so much excitement behind renewable energy, that several ETFs have been started to help make the clean revolution more mainstream. All this is so that governments help make the world more carbon neutral.


The role of tech in green energy trading

Going green, despite its benefits, going forward isn't particularly accessible. This boils down to the fact that a lot of current sources aren't efficient enough to support our way of life. They're either too expensive or too difficult to store, solar energy being the prime example of this.


The evolution of technology will no doubt help proceedings because so many great ideas just require a bit of a push before they are perfected. Interestingly enough, looking to the innovators as an investment ultimately brings more legitimacy to this sector. If that happens to the fullest, what becomes of it has no limit.


Green energy's effect on prices

With an influx in the number of sources of energy out there, a gradual reduction in the prices of this commodity will drop. As a result, fossil fuels will struggle to compete with their cleaner rivals.


Once technology gets us to a point where power is both green and cheap, fossil fuels won't stand much of a chance. Soon after, the different sources will not only take the world over, but the markets as a consequence, at least, that's the hope.


Final thoughts

It’s fair to say that renewable energy in this particular space is not as widely accepted worldwide for multiple reasons. But the growing desire and need to reduce carbon emissions is gradually bringing a higher demand for it. With that in mind, the role of green power in commodities trading can only grow in relation to its global popularity. It is crucial to stay ahead and use proper tools or trading platforms like Finage to gain a profit in the niche.


If this should happen, those getting a head start are going to see returns down the road and as technology evolves to make this energy more accessible. In time, green energy will cease to be a novelty and become about as widely dealt with as food.

You can get your Real-Time and Historical Commodities Data with Finage free Fx Data API key.

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