Major institutional investors have warned politicians that interfering in solar support schemes could spook the market and lead to large amounts of investment being lost.
That was the warning from representatives of the pension industry at the first day of Solar Finance and Investment Conference in London on Tuesday.
Referring specifically to the UK market, Allen Twyning, investment manager, Pension Insurance Corporation, said solar was a good but not perfect investment for people searching for “zero volatility”.
“There are concerns. Credit investors are nervous, insurance credit investors are even more nervous and if there is any kind of sniff of a politician coming in and changing policy or messing around with the cashflows – and remember ultimately we're paying people’s pensions – makes it very difficult for us to invest,” said Twyning.
“That’s why we took a lot of comfort in the UK feed-in tariff regime when it was legally challenged and the government was pretty much told it can't mess around with it. We have seen the consequences in other jurisdictions at a high level of government doing exactly that,” added Twyning. “If you want to put off this big slab of money, that's how to do it. Mess around with the underlying cashflows and it becomes uninvestable for very conservative investors like us.”
Armin Sandhoevel, chief investment officer for infrastructure equity at Allianz Global Investors stressed the importance of the regulatory framework.
“Life insurance and pension funds all have the same problems. About 80% of the discussions I have are not about solar or renewables or ‘creating a new asset class’ they are about regulatory laws,” he said before pointing out how the top solar markets in Europe have transitioned.
“The UK is now very attractive but then the UK will have a peak. The data from Bloomberg New Energy Finance highlights this. When we started in the UK in 2013 the market was 620MW, then 1,600MW last year and 2,300MW this year and that’s the peak, 2016 is at 700MW. We have seen the same in Italy where 2013 was a bad year, 300MW, and last year was about 40MW,” he said.
“Solar is popular firstly because of portfolio diversification, it has an extremely stable cashflow compared to wind for example and the technology, its not rocket science. It’s an easy technology for an asset manager and an insurance company. We understand the technical risk very well, so it is an easy technology and it can be combined perfectly with other renewable energy,” said Sandhoevel.
Twyning echoed those sentiments:
“What's good about solar? The regulatory environment should provide you with long-term stable cashflows. What's bad about solar? The regulatory environment can change over time.
“Just to repeat my earlier point, if you want to put off investors like us, conservative institutional investors, mess around with regulation or make [it] difficult and unclear to follow,” concluded Twyning.