Investing in solar is relatively safe and predictable. Solar only needs daylight to generate electricity, a valuable 'commodity'.
Investments in solar show a good rate of return long term and is inflation protected. Als Vowles, technical director at Southill Community Energy, has worked in the community renewables sector for 15 years. As a renewables developer for E.ON and Low Carbon Solar, she has personally led the development of 9 large-scale solar farms. In short, she knows her solar. Here's what she has to say.
How renewable energy investments work
In talking to potential investors at various events recently, one of the queries that came up time and time again was around whether or not an investment in solar is particularly risky- not because it's an investment per se (all investments come with some level of uncertainty) but because solar - the sun itself - is 'unpredictable', which therefore imbues solar with an extra level of volatility.
It has highlighted a real 'lag' in understanding in how renewable energy investments actually work. So I set out to write down why, generally speaking, investment in solar is in fact comparatively safe and predictable, with specific reference to the set up of our proposed site at Southill, Cornbury Park.
Solar only needs daylight
Firstly, solar photovoltaic panels only need daylight and not direct sunlight or heat to generate electricity. In Oxfordshire where Southill Solar Farm is based, we have done a calculation based on the amount of solar radiation hitting the site and its potential to convert this to electrical energy. This figure or “yield” is affected by the panel’s geographical orientation (due south in this case), the module inclination or tilt, the module quality and any losses that it succumbs to as the power is converted via an inverter from direct current to alternating current – the type we need to supply to the grid. The figure that has been chosen has been produced by a specific type of industry report and one that has withstood careful scrutiny by the banks.
Solar panels have an excellent lifespan
The other thing that we have to take into account when we calculate risk is the panel degradation figure, which is widely understood to be 0.4% per year. This degradation figure has been incorporated into our business model.
Furthermore, unlike many other technologies, there are no "moving parts" in the solar farm and so there is a low risk of anything going wrong. Once the panels are installed and generating electricity, they should continue to do so each day from sunrise to sunset as they stand in the field catching the daylight.
We have also signed up to an annual Operation and Maintenance Contract to carefully monitor the site’s performance on a daily basis. This will make sure that any faults are quickly identified and easily corrected.
Electricity is a valuable commodity
The site will of course be generating electricity which is an extremely valuable commodity. Unless there is a significant change to the way that energy is generated and used over the next 25 years, it is likely that energy will continue to be in high demand and so we should continue to get a good price for the power.
Why pension funds love renewables
The low risk nature of solar investments can be demonstrated by Pension fund investment. Pension Fund Managers have been quick to identify the long term predictable income of solar investments and have invested in solar schemes across the UK as a great match for their commitments. An example of this is Lancashire County Pension Fund which invested £12 million in the Westmill Solar Farm in 2013.
Solar investments enjoy a good rate of return over the long term and are inflation protected and so, as well as doing good for the environment, it can be argued that they are superior in financial terms to a traditional high-carbon investment.
The sun WILL rise tomorrow
So, as long as we continue to believe that it will get light and it will get dark, day in and day out, for the next 25 years – we should see a consistent amount of electricity produced by the site making an investment in solar, a safe bet.
This is your chance to invest in solar
There is still time to join us and invest in Southill Community Energy. Share offer closes 8th April
See our share offer
Buy shares directly through Ethex (the company handling the share offer)
Contact us with any questions.
Als Vowles, March 2016