Global clean energy investment totaled $333.5 billion in 2017, taking cumulative investment to $2.5 trillion since 2010. In addition, the cost of solar photovoltaics has dropped 80% since 2008. According to the 2017 Bloomberg New Energy Outlook, renewable energy sources are set to represent almost 75% of the $10.2 trillion the world will invest in new power generating technology through 2040, and solar is already at least as cheap as coal in parts of Germany, Australia, the U.S., Spain and Italy. The cost of electricity from solar is set to drop another 66% by 2040, and by 2021 solar will be cheaper than coal in China, India, Mexico, the U.K. and Brazil.
Solar businesses represent a diversified value chain of opportunities that can be accessed through liquid and illiquid investment options. With many forms of renewable energy becoming economically viable, consumers have started to embrace these technologies.
How Can Individual Investors Invest in Utility Solar?
Historically, utility solar has not been available to individual investors. The underlying reason is that investments in utility solar development projects were reserved for big corporations, institutions, utilities and the super-wealthy. There has only been a limited number of private utility-scale solar developers and minimum investments in a single project tend to be prohibitively high, thus leaving out individual investors. However, Vasari Energy is changing that. Vasari Energy enables individual investors, as well as small institutions, to access utility solar projects through stock ownership. This stock is available specifically for individual investors interested in the strong return potential of solar development projects.
Technically, private equity refers broadly to all private investment vehicles that are not publicly listed; however, the term Private Equity is also used to refer to private investment strategies that include leveraged buyouts, distressed situations, growth, mezzanine debt, or second offerings. Private equity is taking a position in a company with the anticipation that the company will grow and improve or find new synergies, with the goal to resell the company either to another private investor or to the public market (through an IPO). In the solar sector, there are many potential targets for these varying strategies which have mid- to long-term hold periods. During the hold period, (for most PE strategies listed above) there is no expectation of regular distributions or liquidity provided to investors; however, the promise of future value from successful company sales (or exits) is expected to be large.
The easiest way to invest in alternative energies is through exchange-traded funds (ETFs) that provide diversified exposure within a given sector. In some cases, investors may want to consider exposure to a specific type of alternative energy – such as wind or solar – or investors may simply want exposure to a broad range of alternative energies.
Investors should carefully consider the components of these ETFs before investing in them. For example, some alternative energy portfolios might be heavily weighted in solar, while others may be concentrated in a single country. These elements are important to consider, as they may expose an investor to specific risk factors that they may not expect when investing in what appears to be a broad-based alternative energy fund.
Vasari Energy aims to acquire control of project sites and undertake all areas of development, including environmental studies, transmission feasibility and system impact studies, design, engineering, permitting, and obtaining a power purchase agreement with a qualified buyer of power such as a utility, city government, or high credit quality corporation. The Company may build and operate the projects or sell the fully-permitted projects to a tax equity buyer, utility, independent power producer or another qualified buyer who will carry out the construction, commissioning and operation of the solar energy generating facility. Even though there are several investment routes into this market, we think that developers offer the best potential returns as they are the foundation in delivering this growth.
Other Investment Vehicles
Investors can also take advantage of green bonds, which are used exclusively to finance new or existing climate/green initiatives, defined by the International Capital Markets Association as “projects and activities that promote climate or other environmental sustainability activities.” They can also invest in index funds which enable investors who want to get behind an industry, but lack confidence in their abilities to identify specific winning companies, to bet on the industry at large. The global renewable energy sector is expected to see ongoing growth as governments push to meet new mandates. While the industry has experienced volatility in the past, investors can purchase clean energy ETFs to diversify their exposure and reduce risk.