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Is Clean Energy A Good Investment?

March 25, 2014
Matt Morgan

Google recently made headlines when it invested over a billion dollars in solar and wind energy plants across the US. A Danish state pension fund has decided to invest 1.2 billion kroner (over 132 million pounds) in green energy. Billionaire bankers at the UN called for more investment in January, 2014 – as much as 600 billion pounds a year – into renewable energy.

Clearly, there is a need for investment in what we hope is going to be the future of energy in the world. And there seem to be ready investors among big companies as well. But for a layperson like you that wants to find a high paying yet relatively low risk way of growing their wealth, is clean energy (biomass, wind and solar) investment a good option?

The Reality of Clean Energy Investment

The idea is fascinating – not only can you save the world, but you’ll also be making money off your Good Samaritan deeds! But how feasible is it really?

You can of course, set up a windmill to power your home or office, or install solar panels on your roof. The savings generated by these renewable sources in the long term will be significant, so you can count these savings as an investment. But if you find these installations too expensive or think you won’t enjoy the noise generated by a wind farm in your garden, you can invest in the new types of trusts and funds that are cropping up in the clean energy financial sector.

Renewable energy has not always done well. In the past decade or so, costs were high and many companies, manufacturers etc. looking for capital investment balked at putting their money on an industry that was still taking baby steps. In fact, as recently as April 2013, a CBS News feature article had suggested that renewable energy may not be a good investment opportunity for companies, let alone the layperson.

Lately, however, the costs of clean energy have come down significantly. Now, wind, solar and biomass can be cheaper compared to traditional forms of energy such as grid energy or fuel resources when you look at the savings in the long term. There are already a number of crowdsourcing investment opportunities that are being made available to investors. You just have to be able to identify your needs and find a proposition that suits.

Here is a lowdown at a few investment opportunities in the UK where you can invest in trusts and funds that benefit the earth and make you money at the same time. Most of these were established in 2013, so that is an indication of the rising interest in clean energy investments.

Clean Energy Investment Opportunities

Bluefield Solar Income Fund

This particular fund returns 4.1 percent on your investments, charging between 0.6% on net asset value of over £200m and 1% for investments up to £100m. The fund is aimed at long term solar infrastructures that are expected to output stable clean energy over a period of 25 years of asset life. The trust has been around since July, 2013.

Foresight Solar Fund

Another solar energy investment you can make is in the Foresight Solar Fund that is aiming at a 6 percent annual return. The fund charges a 1 percent yearly management fee and a 2 percent charge for set up. The fund is a relatively new set up as compared to the Bluefield Solar Income Fund. It listed on the London Stock Exchange on 29 October, 2013.

Greencoat UK Wind

This particular trust focuses on supporting wind power as a source of energy. It offers 5.8 percent of annual returns. Charges include a 1 percent yearly management fee and a 0.3 percent fee in case of shares that have a three year lock up. How successful this fund is will depend on whether or not the government continues to support wind energy as an alternative power source. However, the potential for offshore wind energy to become such an alternative source is high, so we must keep our hopes up, however, circumspectly.

When picking a proposition to invest your money in, you weigh the potential returns you can expect against the risks. Corporate stocks are an option, but these typically have higher risks, though they also offer higher returns than money markets (where you keep your money in safe, short term mutual funds).

Green energy funds are effectively corporate stocks. As with all other kinds of investments, you will need to consider your investment horizon and your risk tolerance. The investments that are least risky will usually have long time horizons, while those that are most risky will have shorter horizons. The trick to growing your personal wealth in the least risky way possible is to focus on the long term. Clean energy investment is a big wave that many people want to ride. You can too – just be sure to position your surfboard in order to ride the long term.

Author Bio: Nigel Walters is a great blogger who focusses most of his writing on helping people with investments. His interests would be stocks, the property market and investments. He does a lot of articles over a number of websites one of these being Innovo property investment.

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