Investing in solar and wind is something that is increasingly growing in popularity, largely driven by a mix of renewable energy incentives and political pressure to invest in less emission-intensive energy production.
With any investment of any kind, there will of course be some risks. We’ve taken a look at some of the main concerns to help show you some of the things to look into and think about before making such an investment, as it is definitely a worthwhile one, but not one that should be taken without research.
They tend to be very long term investments
It will depend on which energy project or product you choose to invest in, but it’s fair to say that most debentures are long term investments, usually ranging from 20-25; of which you’re expected to keep for its entirety. You are usually able to sell your shares should you want or need to during your contract, though it may be quite difficult and you’re very unlikely to get all of your money back, especially if you need to sell your shares quickly. Here’s an example.
A main concern people tend to have in regards to solar and wind power investments is that weather can be unreliable – it won’t always be sunny and it won’t always be windy. The single most effective method of reducing regulatory and weather related risk is by diversifying investments across different geographic and technological boundaries. Insurance policies are also popular in order to transfer the risk to third parties. Ensuring that you have adequate insurance is one of the best ways to determine whether you’ll receive any money returned to you should there be any weather related issues, though it’s worth noting that some insurers won’t cover this.
Political, regulatory and financial risks
Although the renewable energy sector is maturing fast, still these technologies are experiencing some hurdles to come to financial closure of actual projects. The renewable energy sector faces an uncertain future due to increasing operational risks, and government funding cuts in the current economic environment.
The riskiest times to invest in a project are during the early stage of the lifecycle, such as during the financing stage. Ensuring that you are covered as best as possible is well recommended, and there are new regulations and companies working on this, as this article from Lloyds outlines.
Therefore the most effective way to reduce the risk to you and your bank balance is to invest in joint ventures with dependable partners or by investing in the latter stages of developments that have already proven themselves to be safe, reliable and of course; profitable.
Additionally, there is an article here by greentechmedia.com that details how to invest in renewable energy projects and orders them in terms of risk levels so that you can identify for yourself which ones may be worthwhile and which ones that are maybe best avoided.