Invest

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

Published

10 years ago

August 8, 2014

Blue & Green Tomorrow

As awareness of solar investments and the risk profile they offer increase, finance in the sector is gradually “coming of age” and attracting institutional investors, according to Solar Media’s Solar PV Finance: 2014 Update.

Jamie Richards, a partner at investment manager Foresight, which launched the Foresight Solar Fund Limited on the London Stock Exchange for £150 million in October 2013, said, “We are seeing increasing institutional appetites for solar investment as institutions are made aware of the low volatility and index linked yields that can be achieved.

“The fact that we were able to refinance our portfolio of UK solar assets 10 months ago with the listing of the £60 million index linked Solar Bonds on the London Stock Exchange, fully subscribed by two-leading financial institutions was indicative that the sector has come of age as offering the risk return profile that appeals to institutions.”

The stability of returns on solar investment is what makes the industry an attractive prospect to certain types of investors, such as pension companies, the article continues. It says the fact that solar and other renewable assets are being placed into structures demonstrates that they are establishing themselves as a separate and acceptable asset class.

The report includes a range of sections looking at finance in the solar industry, including tax equity, consumer finance and crowdfunding, yield cos, bonds and securitisation, and mergers and acquisitions.

One section of the update also highlights why investment in renewables, including solar, is needed. Using figures from the International Renewable Energy Agency (IRENA), the report notes that $550 billion (£327bn) of investment is needed every year through to 2030, to secure a transition to sustainable energy and keep global temperatures from rising above the agreed 2C threshold.

IRENA stated that most of this investment must go to the solar, wind and hydropower sectors. The organisation argues that solar deployment needs to increase by a factor of 12.

It calculated that the switch to renewables would also provide $740 billion (£440bn) of savings each year in environmental costs, compared to burning fossil fuels – effectively cancelling out the additional investment required.

Photo: Intel Free Press via Flickr

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