Solar shines brightest for renewables-keen investors

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Institutional investors ranked uncertainty with energy prices as a top obstacle (Source: Karnakata Tata)

Institutional investors surveyed by the Octopus Group have ranked grid-scale solar power as their top deployment target, amid plans to inject US$210 billion in the broader renewable sector within five years.

A poll of 100 names published by the firm on Monday found 43% of those managing a portfolio of renewables were invested in solar, ahead of firms invested in onshore and offshore wind (28% each), hydropower (27%) and waste-to-energy and biomass (an aggregate 24%).

Of the respondents – a mix including pension funds, insurers and banks with US$6.8 trillion in combined assets under management – Australians (63%) were keenest on solar, followed by EMEA (58%), Asian (45%) and UK firms (29%).

The industry was the most sought-after also among firms currently not invested in renewables, although some appeared sceptical. Some 58% of those managing a renewables-free portfolio claimed to be considering solar plays, while 21% were not contemplating it and another 21% felt unsure.

Five years to unlock US$210 billion

Even as they singled out grid-scale solar as their top target, the polled investors promised to scale up allocations to all forms of renewables, with US$210 billion set to be deployed within five years.

Private banks appeared the most ambitious, sharing plans for renewables to represent 9.7% of their portfolios over the period. They were followed by strategic investors (8.9%) and pension funds (7.8%), while high-net-worth individuals and family offices (5.5%) and insurers (4.7%) were the most reluctant.  

The Octopus survey evidenced the renewables momentum won’t be challenge-free, though. Energy price uncertainty, liquidity challenges and skills shortages ranked as the top concerns for the polled investors, although costs and regulatory barriers were also seen as obstacles.

Europe before its subsidy-free hour

The Solar Finance and Investment conference held in London in late January identified investors as the key enablers of subsidy-free solar in Europe. Corporate PPAs and other emerging arrangements are easing – although not fully dispelling – investors’ unease around merchant risks and potentially low returns, it was argued.

The Octopus poll placed the continent as the most in-demand destination for renewables investors. Of the top 10 countries and region, only Australia (seventh) and Japan (10th) were non-European.

The survey produced a finding likely to be welcomed by subsidy-free players. Almost one-in-two institutional investors piling into clean energy worldwide was driven by stable cash flows (a driver for 48%) and attractive risk-adjusted returns (40%); only diversification and ESG considerations placed higher.

See here to read the full findings of the Octopus survey

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