For many years solar power was viewed as the poorer relative in the renewable energy family and not an investment. Although we loved the idea of ‘free’ energy, inefficient technology and a reliance on good climate made solar power an unattractive investment, and the cheapness of fossil fuels along with major advances in wind turbine energy kept solar energy on the back boiler.
Things have changed in the 21st century; as well as major advances in technology one of the greatest breakthroughs has been the adoption of renewable energy targets by governments worldwide.
By committing themselves to targets governments have had to invest more in technology and give financial backing to the solar energy market. With the introduction of effective feed-in tariffs the solar energy investments market has finally come of age and is a serious consideration for anybody looking to invest in green economies.
The UK solar industry is set to boom, with estimates that it will be worth over 16 billion Euros (£14 billion) within the next twenty years.
Solar energy is a key factor for many governments, especially within the EU, in achieving their renewable energy and carbon emission targets. Currently the UK solar investment market is slightly behind countries such as Germany and Spain, but in the light of recent legislation this sector is expected to expand rapidly in the near future. There are a number of large solar companies currently operating in the UK, the most prominent of these are Solar Century, Romag, Sharp and Crystalox. All of these companies are involved in the manufacturing, installation and integration of a series of different solar power products.
How to invest in the solar energy market
At the grass roots level it is possible to buy and install photovoltaic (PV) panels on your property. Not only does this enable you to benefit from cheaper energy bills, you can also sell your excess energy back into the grid on a feed-in tariff.
Feed-in tariffs (FIT)
PV panels were estimated to generate a 12% – 15% annual return on investments over a 25 year term. (See changes below to tariffs) Initial investments will depend on the size of your roof and the number of panels that you choose. You can count on around £10,000 outlay with approximately 8 – 9 years before this fixed cost is paid off and your PV panels are generating a clear profit. There are not too many investments that pay themselves off over that period.
PV panels should be supplied and installed by reputable companies that are MCS certified; in fact this is a requirement if you want to benefit from feed-in tariffs.
On a larger scale, solar power is harnessed using Concentrated Solar Power (CSP) technology. This technology uses the heat from concentrated solar energy to drive conventional turbines. With new, efficient heat storage techniques these turbines can now run 24 hours per day. CSP technology does require direct sunlight and Spain is the leading player in Europe in this field. The US also has many CSP plants in the pipeline and the World Bank’s Clean Technology Fund is looking to support the development of massive CSP plants in the Middle East and North Africa. More information on Feed-in Tariffs.
Solar energy investment schemes to support CSP plants are available in the form of corporate bonds. There is currently particular interest in a new €320 million CSP plant in Spain. With EU legislation forcing utility companies to buy renewable forms of energy at above market prices this is an attractive investment opportunity, offering good yields over a long term period. Bonds are available for around €25k, €50k or €100k and investors can look forward to revenue streams of around 8% – 10% per annum throughout the duration of the investment with fixed terms of 5 or 10 years. Many of these investment contracts have been approved by UK SIPP companies and project development finance is from an AAA rated Norwegian bank.
- Carbon offsetting, carbon trading
- Emissions trading
- Feed-in tariff (FIT)
- Green oil investment
- Renewable energy investment
- Solar investments