Renewable energy infrastructure projects: why such a rush?

Alongside specialized financial funds, crowdfunding players are positioning themselves.

They allow citizens to invest, making renewable energies more competitive while maintaining a very low level of risk.

Hospitals, highways, rail networks, or electricity production… infrastructure is vital to our basic needs. Heavy investments are sometimes necessary to maintain and develop them. Financed through public-private partnership (PPP) or public service delegation (DSP) contracts, these well-structured projects present little financial risk when the public counterpart is a state like France.

The appeal of renewable energies

Currently, liquidity is flowing freely into what are called "infrastructure funds"[1]. Renewable energy projects captured €4.3 billion of the €52 billion under management in France at the end of 2017 (including €20 billion uninvested). These projects are benefiting from the momentum of COP21 and the ambitious development objectives set by Europe and France. Low risks, significant capital amounts, societal issues, and recurring long-term revenues: the sector is of interest to investors of all stripes. This is not surprising, given that risk aversion, profitability, and purpose remain the key words in investment decisions.

The crowdfunding alternative

While "infrastructure funds" are increasingly involved in renewable energies, they are not the only ones. Crowdfunding players like Enerfip are starting to nibble away at a (currently derisory) share of this market. In doing so, they are enabling:

– lower interest rates, averaging 5%, compared to 7 to 10% for "infrastructure funds," thus making renewable energy more competitive;

– citizens to invest directly in this type of highly sought-after project, which until recently was the preserve of investment funds.

Limited risks

For renewable energy, wind, solar, etc. are free. So, once the development risk is eliminated, projects in France are very low risk, because:

– construction costs are experiencing a significant regular decline;

– the performance of installations is constantly improving;

– It is easy to predict the revenues of a project over 15 years for wind power and 20 years for solar. The preliminary studies are very precise;

– the regulatory framework is now very structured. As a result, it limits the regulatory risk often considered one of the major risks in public-private partnerships;

– the public authorities are stakeholders in these projects. They intervene via support mechanisms (additional remuneration or EDF feed-in tariffs for projects that win CRE calls for tenders).

Thus, crowdfunding players specializing in renewable energies currently have zero failure rates. Conversely, general crowdfunding platforms have recorded failure rates of 10 to 20%.

Guilhem, from the project analysis team

[1] Investment fund specializing in the infrastructure sector: ports, airports, highways, radio towers, satellites, etc. , that is, assets perceived as low-risk because they are essential to economic life.

[2] Activity of French Infrastructure Funds in 2018