EvoEnergy: renewable energy investments offer better returns than pension funds

An investment in a renewable energy project can offer significant and reliable long-term income to private investors in retirement, perfectly complimenting a pension, according to new research.

In a new analysis, the leading independent solar PV installer EvoEnergy compared the estimated returns generated over 20 years from an investment of £5,550 in solar panels, debentures for renewables projects or a typical managed pension fund.

They found that domestic solar installations could deliver annual returns of more than 10% for the duration of the government’s Feed-in Tariff (FiT). A typical pension fund would likely grow by 6% year on year over the same period.

EvoEnergy opted to investigate such investments’ potential for pensioners after energy minister Greg Barker said in February that installing domestic solar panels could be a better long-term source of income than a pension.

Though the upfront costs for solar installations can sometimes be high, the savings on energy bills they provide – in addition to the ability to sell excess energy to the grid – means households can soon recoup their money.

“Barker said returns of 8% or above could be achieved – what we found was that, with an average, unshaded 3kW array installed at a cost of £5,550 upfront, a homeowner could see returns of more than 10% once the FiT, export tariff and possible energy savings are accounted for,” explained Steve Wilks, director of finance at EvoEnergy. 

“That’s more than £600 per year before inflation with just a moderate 25% saving off energy bills accounted for.

“Investing in solar is by no means a direct replacement for traditional pension funds, in our opinion. However, what it does offer is a tax-efficient alternative for a lump sum that isn’t susceptible to market fluctuations that can deliver significant returns over the medium to long-term in addition to a pension,” he said.

Alternatively, investments in larger renewable energy projects can achieve yearly returns of up to 8%, EvoEnergy said.

Renewable energy crowdfunding platform Abundance Generation is one firm that offers debentures – bonds or debts lent to wind farms or solar projects that are then secured on a share of the revenue that each project generates over its lifetime – to private investors.

Bruce Davis, managing director of Abundance Generation, added, “Each investment is individual and offers different returns, however Abundance targets projects which are estimated to produce an IRR of 7% of more. This would potentially provide investors with around 2.2 times their original investment. 

“From our point of view, generating electricity from solar power offers homeowners a real choice when looking for a long term income generating investment in their retirement.”

Photo: Edmund Tse via Flickr

Further reading:

Citigroup: solar industry to outperform fossil fuels in long term

Investment conundrum: solar panels or a pension?

Solar energy investment ‘coming of age’ and attracting institutional investors

Abundance Generation raises £665,000 investment for solar farms in Kent

Solar panels now on nearly 500,000 rooftops across UK