7 Reasons Why This Is The Best Energy Source
Investing in renewable energy is no longer just a dream. This is now a reality, thanks to the increasing demand for green energy and its increasing prices. In fact, investing in renewable energy projects has become one of the most popular investment strategies. There are several ways to invest in renewable energy projects directly, including an initial investment (such as private placements), direct equity positions (through joint ventures or public offerings) or through passive investment vehicles such as exchange-traded funds (ETFs).
Benefits of Investing in Renewable Energy Projects
Renewable energy projects are vital to help reduce the carbon footprint of countries and industry. But as we have mentioned earlier, investment in renewable energy projects requires great risk. There is a high level of uncertainty associated with these investments. So, in order to minimize the risks, there are a number of ways to invest in renewable energy projects. Let’s look at these reasons to make it clear why investing in renewable energy projects is beneficial. For starters, renewable energy projects are profitable due to the following reasons: Government incentives Renewable energy projects are profitable if the governments allow their investments in these projects.
The Global Renewable Energy Market
According to the research firm GlobalData, the global renewable energy market is expected to grow significantly from $244.4 billion in 2016 to $344.7 billion by 2021. This will represent a compound annual growth rate of 5.4% during 2016-2021, with renewable energy generating approximately 2% of global electricity. These numbers include photovoltaic energy (based on photovoltaic modules), large hydropower projects (using dams), biomass (based on forestland), and wind and solar energy. The renewable energy market is still dominated by the biggest players in the market, but there is significant opportunity for small and midsized firms to grow their market share. The United States Renewable Energy Market According to a United States Energy Information Administration (EIA) analysis, the U.S.
Different Types of Renewable Energy Projects
Below, I have outlined some of the ways to invest in renewable energy projects, including but not limited to a carbon tax or renewable portfolio standards (RPS). 1. Private Placements As mentioned earlier, private placements are one of the most popular ways for investors to gain a stake in renewable energy projects. These are private placements that allow companies to raise capital through share sales without any public offering. There are several ways of acquiring a stake in the renewable energy projects through a private placement. However, the easiest and best way to do so is through a private placement. Another popular way of gaining a stake in a renewable energy project is through a joint venture.
Private Placements and Initial Investments in Renewable Energy Projects
While there are several sources to invest in renewable energy projects, such as public offerings, private placements, partnerships and joint ventures, the most popular route in this sector is direct equity positions. In private placements, a company (such as a renewable energy developer) attempts to raise capital by selling its shares directly to the public. Investors in this type of private placement are typically highly-focused and knowledgeable investors, who have the ability to enter into long-term contracts with the developer for their respective investments. Moreover, in order to generate a significant return on their investment, investors are usually looking for special dividends or carry opportunities.
Equity Investments in Renewable Energy Projects
Equity investments in renewable energy projects are fairly new, and many investors would be aware of the risks associated with this type of investment. However, there are also several reasons why this is the best type of investment to make in renewable energy projects: The effect of monetary policy. These investments work better for companies that have cash flows in the short term. This is because in the long term, investors are likely to invest in stable companies that have a proven track record of generating cash flows. The shorter the duration, the better. This is because the investments in renewable energy start performing right away.
Passive Investment Vehicles for Green Energy Investments
As a small investor, you can be involved in an emerging industry with a low entry barrier, and with a long growth runway in which to reap huge returns. Passive investment vehicles are a good way to invest in renewable energy projects through real estate, including real estate-backed green bonds. These passive investment vehicles also provide portfolio diversification and protection from market downturns. Green Bond Investments Green bond investments are bond investments that finance renewable energy projects. With the use of a financial instrument, the issuers aim to facilitate the repayment of their debt by financing renewable energy projects, which reduces the burden on taxpayers for the projects’ maintenance and operating costs.
Exchange Traded Funds (ETFs)
If you’re looking for a good renewable energy ETF to invest in, you’re in luck. For example, one of the best renewable energy ETFs is the US Oil & Gas Clean Energy Index ETF (NYSEARCA: BOIL). With a market capitalization of around $158.4 million and $29 million of assets under management, BOIL is a diverse fund that tracks the performance of the Energy Select Sector SPDR ETF (NYSEARCA: XLE), which is an index representing stocks in the oil and gas sector. Why should you invest in BOIL? First, BOIL provides exposure to the growing renewable energy sector, which will benefit from continued technological advancement and infrastructure expansion. This is due to the new trends in the renewable energy market, which include electricity generation from natural gas, wind and solar energy.
Bond-Based Investment Vehicles for Green Energy Investments
Renewable bond investment vehicles offer a unique set of benefits for investors. The first benefit is that these instruments offer a source of easy passive income and distributions for investors. This is beneficial to a portfolio because it allows you to do nothing but sit back and collect your quarterly distributions, all the while getting to benefit from a growing and profitable green energy company. Another major benefit of renewable energy bond investment vehicles is that they offer substantial diversification to a portfolio, meaning they ensure that your investment in renewable energy will not be solely exposed to one particular sector. Furthermore, these bonds do not require monthly payments, and their interest rates are determined on a quarterly basis.
