The World's #1 Renewable Energy Network for News, Information, and Companies.

Solar Energy Increasingly Considered a Safe, Attractive Investment

Solar Energy Increasingly Considered a Safe, Attractive Investment

Pension fund managers are investing more in solar energy, undeterred by declining returns because the industry is considered a safe alternative to traditional securities such as government bonds.

That’s the conclusion of executives from two of the biggest Chinese solar panel manufacturers, which have listed their shares in New York. Trina Solar Ltd. said it’s seeing more interest from fund managers, and Wuxi Suntech Power Co Ltd. said these managers accept returns as low as 1.7 percent.

Pension funds are “prepared to invest more in PV, as they have done with wind, because they see it as a sustainable and reliable income,” Benjamin Hill, president of Trina’s unit in Europe, said in an interview.

The comments are evidence that fund managers are getting comfortable with solar projects, tapping stable returns as central banks keep their benchmark lending rates near historic low levels.

The European Central Bank earlier this month cut the main refinancing rate to a record 0.15 percent and moved the deposit rate below zero for the first time, meaning banks will be charged to park cash with the central bank.

Bond Alternative

While returns for new solar projects in mature markets are now too low for private equity firms, “many pension funds decide to invest into solar as it offers a good alternative to government bonds, and at the same perceived risk level offers higher returns,” Pietro Radoia, a solar analyst at Bloomberg New Energy Finance, said today by e-mail.

While the funds are most interested “in big utility-scale projects” earning between 2 percent and 5 percent, they’re content with lower returns if the plant is located in a country with a stable government and regulatory regime, such as Germany and the U.K., Suntech Chief Executive Officer Eric Luo said in a separate interview.

U.K. insurer Prudential Plc, which is also a top pension provider, earlier this year bought 25 percent of NextEnergy Solar Fund Ltd., a newly-listed 85.6 million pound ($144 million) fund that seeks to buy plants in the U.K. The South African Government Employee Pension Fund, the continent’s largest for retirement savings, said earlier this month it will buy a 40 percent equity stake in a concentrated photovoltaic project Soitec SA is building in the African country.

‘Mature Technology’

“Institutional investors that have in the past invested in government bonds are forced to look for alternatives amid low interest rates, and solar is an attractive one,” Philipp Seherr-Thoss, chief operating officer at Milk the Sun GmbH, a German online seller for solar power plants, said in an interview. “Solar is now a mature technology. You can invest large volumes over long periods with interesting returns.”

While institutional investors generally seek to buy parks starting at 5 megawatts to 10 megawatts, they “also invest indirectly via securitized vehicles of pooled smaller parks,” Seherr-Thoss said by phone from Berlin, where the company is based. He is managing the potential sale of a 30-megawatt plant in France that requires 40 million euros ($54 million) of equity and a portfolio of projects in Japan, he said.

Copyright 2014 Bloomberg

Lead image: Dollar signs via Shutterstock

RELATED ARTICLES

The Big Question: What Is the Most Frustrating Part about Working in Renewable Energy?

Renewable Energy World Editors

Every industry has its challenges and misunderstandings. Sometimes the obstacles we face in simply trying to do our jobs can be very frustrating.

ViZn Flow Batteries

ViZn Turns to Jabil to Meet Growing Demand for Flow Batteries

Andrew Burger, Correspondent Energy storage startup ViZn, developer of advanced zinc-iron flow battery technology, is scaling up the size and scope of its operations as it works to meet growing demand from a variety of customers both in the U.S. and a...
Norway and Sweden flags

Nordic Renewables Boom Set to Exceed Wind Energy Target

Jesper Starn, Bloomberg

Sweden and Norway will probably exceed a joint target for renewable energy production by the end of the decade, industry consultant Nena AS said.

Renewable energy community

State and Metro Governments, Consumer Actions Drive Dramatic Shift in US Energy Landscape

Ron Pernick, Clean Edge The United States is experiencing a significant shift in its energy landscape. Last year, utility-scale wind and solar power combined for 47 percent of new generation capacity in the U.S. Based on this expansion, 11 states...

CURRENT MAGAZINE ISSUE

Volume 18, Issue 3
1505REW_C11

STAY CONNECTED

To register for our free
e-Newsletters, subscribe today:

FEATURED PARTNERS



EVENTS

PV-401: Advanced Field Training

Real world on the job solar installation, training, and experience is th...

PV-201: Introduction to PV Design & Installation

PV 201 Introduction to PV Design & Installation is simply the best i...

PV-301: Advanced PV Design & Installation

This highly desirable and advanced course is intended for the profession...

COMPANY BLOGS

Solar Tracking – A Key Technology for Unlocking the Full Potential ...

Quotes for very large solar photovoltaic projects in sunny parts of the ...

Customer Profiling

Before you reach out to a prospect, do you take the time to research the...

Meteorological Technology International Magazine - SENSORS AND SENS...

Over the past 10 years, these sensing technologies have spread tre...

SOCIAL ACTIVITY

Tweet the Editors! @megcichon @jennrunyon

NEWSLETTERS

Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now  

 

FEATURED PARTNERS