In a previous blog post, we discussed how to invest in solar energy projects. In this post, we will discuss how to invest in renewable energy more broadly. This topic typically includes choosing multi-billion-dollar investment portfolios that are allocating major funds for renewable energy. But you don't have to go big or go home. Thousands of crowdfunded projects are creating new ways to invest in renewable energy.
Private equity funds are in the middle of a historical shifting of funds from fossil fuel energy to wind, solar, and other renewable energy assets. Industry insiders say that numerous trends have sparked fund sponsor's interest in the sector.
First, the asset class has matured to the point that the technology behind clean energy (in the form of wind turbines and solar panels) is widely proven. Second, federal and state climate policies have mandated the de-carbonization of the energy sector. Third, fund LPs are calling for increasing clean energy investments in order to promote sustainability initiatives.
Private Equity International notes that unique financing structures in the United States make renewable energy investment particularly attractive:
The US tax code heavily subsidizes domestic renewables--a unique feature that has always shaped the US renewables investment landscape. Solar projects qualify for a federal tax credit equal to 30 percent of their cost, and wind projects qualify for a federal tax credit worth approximately $24 per MWh of power generated during the first 10 years of operations. Combined with depreciation tax deductions, these tax benefits are often worth more than 50 percent of the value of the project.
So how do you get down to investing? A good place to start is with an alternative energy ETF. In this way, you can diversity across several companies through purchasing alternative energy exchange-traded funds.
Here are five ETFS that Investopedia ranks the highest by reason of market cap, liquidity, and potential stock growth.
TAN follows the Mac Global Solar Energy Index, which tracks 23 stocksand keeps 90 percent of its investments in securities from the index.
PBW provides exposure to U.S. companies engaged in advacing cleaner energy and conservation. It follows the WilderHill Clean Energy Index and invests at least 90 percent of its assets in stocks from the index.
This ETF tracks the Nasdaq Clean Edge Green Energy Index, which includes 39 stocks in its portfolio.
This ETF tracks the Ardour Global Index; it focuses on companies in an area considered alternative energy.
The S&P Global Clean Energy Index is considered the benchmark of this ETF. It keeps a 90 percent concentration of assets from the index. The other 10 percent are futures, options, and swap contracts.
Investing in large-scale portfolios aren't the only way to get involved with the clean energy revolution. Many online companies are now offering funding platforms for renewable energy projects and cleantech companies.
One of them is GridShare. You can easily browse offerings on the site and back projects through equity, debt, and donations.
The second is StartEngine. Established in 2016, the site facilitates investment in early-stage startup businesses, including renewable energy companies. It partners with small businesses, entrepreneurs, and others, enabling about 150 financings through the platform since its inception. It operates at a higher scale than Kickstarter or Indiegogo, allowing bigger businesses to get their liftoff.
One case study of success on StartEgine is the Affordable Community Energy Services Company, which raised nearly $25,000 on the platform. Here's their story:
ACE’s mission is “to bring environmental and financial sustainability to owners and residents of low-income housing” through green retrofits by providing disadvantaged households with 100% of the capital needed for energy upgrades. After providing these upgrades, ACE receives revenues via a developer’s fee and contract revenues over a 10-year agreement paid for from energy and water savings, as well as payments and/or government subsidies for solar and cogeneration production. This model ensures ACE isn’t just providing an environmental solution and helping low-income families, but “in the process, provide a return to our social impact investors.”
An even better company to invest with renewable energy with is GoSun. You can now back it on StartEngine.
“Many investors are looking for a way to alleviate the potential problems of climate change," said Patrick Sherwin, GoSun CEO. "GoSun provides a unique opportunity because we provide several solutions to massive, global issues. Or technology can cook, cool and charge off-grid, helping people become energy independent and to cut down their emissions."
As of this writing in November 2019, nearly a quarter-million dollars has been raised from investors who now have an equity stake in the company.
With innovation at the core, in 2018 GoSun launched the first hybrid solar and electric oven through Kickstarter so customers can cook at night. In 2019, the company launched a solar-powered cooler on Indiegogo, that eliminates ice, thus freeing up space, keeping contents from being soaked and smashed.
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