Creative Financing for Renewable Energy

Harris Roen, Editor
Roen Financial Report
February 28, 2013

As more homeowners and business become interested in installing solar, a myriad of financing options have evolved. From third-party financiers to Solar REITs, the options available to benefit the renewable energy industry and end users keep expanding. This article highlights what alternative energy investors should know about trends in creative financing for renewables, and which investments should profit.

Solar REIT

What it is:

A Real Estate Investment Trust (REIT) is a security that invests directly in real estate. Investors can buy and sell shares of the REIT like a stock. The REIT can either own the property outright, or own mortgages, or both. REITs generally earn money from rents, or mortgage interest. Solar REITs take this concept and invest in solar properties.

Benefits of Solar REITs:

Typically REITs invest in commercial real estate (hotels, malls, offices, apartments, etc.), which allows investors to become shareholders in profitable real estate projects. A solar REIT generates large-scale financing and allows individuals to own a piece of a significant solar project.

Investment opportunities:

There is one REIT I know of that has a hand in solar, Power REIT (PW). This REIT owns the land under the huge 5.7-megawatt solar farm in Salisbury, MA. It also owns long-term leases on 112 miles of railroad that services Marcellus Shale natural gas developments.

There was an excellent analysis of the company by Forbes blogger Tom Konrad a few months ago when it was trading around $8/share. The stock peaked around $11/share about a month ago, and it is still probably a good buy if it moves down to the $10 range. Caution is advised, though, due to legal issues the company is working through. However, Konrad reports that there is light at the end of the tunnel for PW.

On another front, Bloomberg New Energy Finance reports that a new California startup, Renewable Energy Trust Capital, Inc., may soon win approval to start raising money as a solar REIT. Should this be approved, I expect more Solar REITs to become available to investors in the years ahead.