Investing in energy is no new thing.
For years businesses and private investors have invested in oil and gas. Yet as renewable sources of energy become more popular, we are also seeing a new and exciting opportunity for investment in areas such as solar.
In this article, we explore the best ways that businesses and individuals can invest in solar energy. It will offer inspiration and open your eyes to the opportunities out there.
Of course, you should seek professional financial advice to ensure that you make a well-informed investment decision based on your unique circumstances.
Installing solar panels
One of the simplest ways to invest in solar energy is to install solar panels at your home or business. This is often seen as a way to save cash, rather than as an investment.
In fact, over a period of 25 years, you could expect to save/make £25K + with a typical 4kW panel system, which would cost you an initial investment of £6-10K to install. Plus, installing solar panels on your home can increase its value by 3-14% should you ever sell.
Roof renting is another popular solar investment option.
This option will see solar installation businesses installing panels on your home, typically free of charge. The installation company then maintains ownership of the panels and the electricity it produces. They are free to sell the electricity back to the grid or to the owner of the property.
In exchange, the property owner receives a rental payment for the roof space and/or free or discounted electricity.
This is a popular investment option for homeowners or businesses who want to benefit from solar energy, but do not have the available funds to pay for the entire installation themselves. It can also be a great option for those that want to generate a steady and reliable source of income over the term of the agreement.
Invest in solar farms
Businesses and private investors can also take a more traditional approach to investing in solar. This is typically done through investments in solar farms. There are four main ways this can be done:
- Direct investments – this involves purchasing a stake in a solar farm from a private equity firm or investing directly in a developer or operator.
- Renewable energy funds – these are managed funds that invest in a portfolio of renewable energy projects including solar farms. One benefit to this approach is that it makes it easy to diversify your solar investments, helping you spread the risks.
- Solar bonds – these are debt securities issued by solar companies in order to raise capital for solar projects. Solar bonds can offer a fixed income and can usually be purchased from investment platforms and brokerage firms.
- Investment in stocks – this involves investing in public solar energy companies that operate solar farms. This can typically be done through a brokerage account.
Which option is best for you will depend on several unique factors, which is why we recommend seeking professional financial guidance on the matter.
Feed In Tariffs (FIT) was a UK government scheme that ran from April 2010 to April 2019. The scheme was designed to promote the uptake of renewable/low-carbon electricity generation. Unlike the current scheme (SEG), FIT guaranteed participants payments for all the energy they generated, rather than just what they sold to the grid.
This was a lucrative scheme. Even though you cannot join the scheme anymore, you can still benefit by buying out those who are still part of it. This typically works by offering participants ‘money now’ in exchange for ownership of their FIT, which will generate a recurring income for as long as their agreement states.
For example, an individual or business may offer a FIT participant £3,000 for ownership of the remaining agreement. This agreement may have 15 years remaining and generate on average £400 a year, making a total of £6,000 over the remainder of the agreement.
To benefit from this approach, you can either set up as a business, finding FIT participants to buy out. Or, an easier route, is to invest in companies that are already set up to do this.
Renewable source investment: Businesses
Many businesses across the UK are benefiting from solar by investing directly in renewable sources.
Online retailer Amazon is already making considerable investments in solar power. In fact, they recently announced that they are set to break the record for the most renewable energy purchased by a single company.
Part of this effort includes 26 on-site solar energy projects. Which, when combined with 5 other large-scale renewable energy projects have reached a capacity of more than 560 MW.
But Amazon isn’t alone. There is a growing trend of large and small businesses investing directly in solar projects. For example, IKEA is set to spend a massive €3.4bn on renewable energy by 2030. Ingka Group (IKEA’s owner) has already invested €2.5bn over the past 10 years into installing 935,000 solar panels on the roofs of its warehouses and stores.
Once the largest operator of solar rooftop PV installations, Sainsbury’s is another big investor in solar power. They have now invested in solar installations in more than 200 sites, with a cumulative capacity of 41MW.
Solar investment: Summary
It is clear that investing in solar isn’t just environmentally friendly, but makes good economic sense. As we continue to see a growing need for renewable energy alternatives, the scope of opportunity in solar investment is set to grow. This will generate greater opportunities and will likely see those making early investments produce considerable returns.
In this article, we have explored some of the best ways to invest in solar. Which one is right for you will depend on your unique circumstances, how much you have/want to invest and your appetite for risk. Use this guide as inspiration, whilst seeking professional financial advice on where best to focus your money.
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