I have always been intrigued with investing in renewable energy. A couple of years ago, I looked into installing a rooftop solar system to generate passive income by selling the generated power to the grid during on-peak hours. However, after some researching, it turned out that the initial investment was quite steep (approx. $30,000) and the generated returns were not sizeable enough to warrant it. In addition, there is no way to shelter the income from taxes, so I dropped the idea after some serious consideration.
Equity Space in Renewables
Over the last year or so, I started researching yieldcos – spinoffs from utility companies, which focus on the renewable space. There are plenty of such companies, which provide juicy yield in the market such as Brookfield Renewable Partners (BEP), TransAlta Renewables (RNW.TO), NextEra Energy Partners (NEP), 8Point3 Energy Partners (CAFD) to name a few. Analyzing these companies financially, I concluded that most of them are heavily debt-laden and provide immense risk as far as the principal goes, while searching for that high yield. This is the risk that comes with investing in equities and instead of investing in each individual company, if I was looking for equity investment, I’d rather look for a broader ETF – YieldCo Index ETF (YLCO) is the only one I am aware of that specializes in this space giving exposure to the sector.