Solar Investing Grows Up

When I was asked in an interview last month what I thought 2014 would hold for green tech finance, I said 2014 would be the year that “renewable energy finance comes of age.”  What I mean is that a new type of renewable energy investment is proliferating. Solar, other renewables, and energy efficiency investments are no longer limited to risky growth plays like Tesla Motors (NASD:TSLA.) There are now a number of yield focused investments available to small investors. As of last year, there was a mostly hydropower partnership: Brookfield Renewable Energy Partners (NYSE:BEP), an energy efficiency focused Real Estate Investment Trust (REIT): Hannon Armstrong Sustainable Infrastructure (NYSE:HASI), and a wind power focused “Yieldco”: Pattern Energy Group (NASD:PEGI.) There is also a solar crowd funding platform, Solar Mosaic.

In that same interview, I predicted: “I think that we will see a few publicly traded ‘yield cos’ (yield companies) in solar listed in 2014.” In other words, I predicted that 2014 would bring IPOs for two or more companies investing in solar and offering attractive dividend yields. On Wednesday, SunEdison Inc. (NYSE:SUNE) submitted a draft registration for what is likely to become the first US IPO of a solar yieldco. Other groups such as Grid Essence and CleanREIT Partners are currently raising funds for solar yieldcos to be listed in Canada.  The rapid increase of green yield vehicles in the US and abroad has made it possible to build a high-yield diversified equity mutual fund for investors frustrated with the growth-only character of the existing green mutual funds. I’m working with Green Alpha Advisors on launching just such a strategy (currently available to individual clients of Green Alpha in separate accounts.) We hope to follow this with a fossil free mutual fund following the same strategy if there is sufficient demand. I personally think that the yield, which is near 5%, is likely to stimulate that demand. When such mutual funds and exchange traded funds (ETFs) are available, it will create a new source of funding for green infrastructure companies, and further stimulate the growth of the sector.
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