Retail Investment Expands in Clean Energy Markets

Retail investment in clean energy is starting to flourish. Historically, investments in clean energy were only available to institutional investors. Recently, access has become available to retail investors through new investment vehicles such as solar bonds.

On Nov. 18, Clean Edge presented a webinar exploring this topic. The event, “Clean Energy Retail Investing: The Rise of Bonds, REITs, Yield Cos, and other Investment Vehicles,” was co-hosted by SolarCity.

The webinar featured panelists with expertise in this changing market environment. They explained the details of these newly available investment options, described the impetus behind these changes in the market, and examined the future for retail investors in this burgeoning space.

“Whenever you have a disruptive technology, you have massive investment opportunities,” said Tim Newell, vice president of financial products at SolarCity. “There hadn’t been much opportunity for retail investors to invest in solar. We wanted to attract individuals by giving anyone the opportunity to invest.”

To attract investment into clean energy, SolarCity began offering an innovative option for individual investors through solar bonds. These are corporate bonds issued by SolarCity with interest rates of up to 4 percent. Typically, they have a one-year duration.

“The investors attracted to this option range from individuals who are putting some small savings into solar bonds to people putting in hundreds of thousands of dollars,” Newell said. “They also attract people who don’t necessarily have access to solar energy in their homes. So now, with solar bonds as an option, even though they may not be able to save money on solar, they can earn money on solar.”

When speaking about the risk profile of these bonds, Newell said that the one-year duration of the SolarCity bonds provides more liquidity than a longer duration might offer. However, the bonds are unrated since they are corporate bonds issued through SolarCity, which is unrated at this time. SolarCity wanted to give individuals access to solar quickly, so the company started with unrated bonds. This may change if SolarCity becomes rated.

Investment in clean energy has seen growth from both institutional investors and retail investors. Newell said this is the result of the cost of solar coming down dramatically in the past five years. It has now become the economical option for consumers. Newell believes technological innovation as well as financial innovation will continue to drive growth.

Nancy Pfund, founder and managing partner of DBL Investors, said there is an innovation cycle in clean energy which will continue to drive impact investing now and in the future. “It’s where value meets value – the ability to invest in opportunities that make returns but also create solutions that achieve your personal values, such as improving the environment and helping with climate change.”

“To avoid global warming issues and achieve our emissions goals, we need to get significant investment,” said Amy Davidsen, executive director of North America for The Climate Group. “About one trillion dollars of new investments are needed, which is about triple what is done today, so we really need to scale the solutions even faster. New investment vehicles have the ability to bring in money from retail investors as well as more investment from institutional investors.”

Pfund said it is realistic to be able to scale up investments in clean energy to the point where we can significantly impact carbon reduction. “Now that solar is showing that it can be the more economical option for consumers, there is significant opportunity in the space and the ability for solar to surpass fossil fuels.”

Disclaimer: Nancy Pfund is a member of the advisory board of the Clean Energy Finance Forum.

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