Renewable energy: how to cash in as the US goes green
A rapidly growing emphasis on renewable power in America will boost investors’ portfolios. Max King outlines the best ways to invest.

Renewable energy accounted for just 25% of US installed electricity-generating capacity in 2018, well behind the UK and Europe, and 43% of that was from long-established hydroelectricity schemes. About 22% of US capacity still came from coal-fired generation, which has all but disappeared in most of Europe. Yet renewable energy is expected to account for 53% of US capacity by 2040, of which just 14% will be hydroelectric.
This offers a major opportunity for the two specialist funds recently listed in London. The US Solar Fund (LSE: USF) raised $200m in April 2019 and the Ecofin US Renewable Infrastructure Trust (LSE: RNEW) raised $125m last December. The former is fully invested and, at $1.04, trades at an 8% premium to net asset value (NAV). The latter has only invested $61m in the seed portfolio and, at $1.02, trades at a 4% premium. Both promise a 5.5-cent dividend when fully invested, which means this year for USF.
Texas goes green
Jerry Polacek, RNEW’s manager, points to “tremendous growth in the last four years, encouraged by states setting minimum generation requirements. This does not just apply to progressive states such as California but also, Polacek says, to Texas, a conservative state that is rich in oil and gas but also “has a fantastic wind resource, is great for solar and has a liberal regime for granting the necessary permits.”
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
With his ambitious climate agenda, Joe Biden hopes to accelerate the trend to renewables but renewable energy is already “an economically compelling source of power”, especially relative to coal, as a result of huge cost reductions. Still, the commitment to switch federal agencies to clean-energy and electric vehicles and the granting of offshore wind licences by the federal government will be a help. US solar capacity, just one gigawatt (GW) at the end of 2009, increased by 13.3GW during 2019 to 76GW, helped by a 77% fall in costs in ten years. Investment of $175bn over the next ten years is expected, despite the reduction of investment tax-credits.
Wind capacity reached 107GW in 2019 and a further $255bn of investment is expected by 2050 despite a similar reduction of tax credits. The diameter of rotor blades has increased by 245% since 1999 and by 62% since 2009, reducing construction, maintenance and replacement costs while multiplying capacity. A doubling of the radius of rotor blades increases capacity eightfold. The US power market is 13 times larger than the UK’s and 30% larger than the EU’s – but solar penetration is 40% lower than in Europe and wind penetration around 40%-60% lower. Yet solar irradiation in the US is, on average, 2.7 times that in the UK while the US’s larger land mass provides more and cheaper sites. Polacek expects bifacial solar panels to further increase output capacity.
High targeted returns
RNEW, with the broader investment remit, targets investment returns of 7.5% from contracts ranging from ten years to over 25. The seed portfolio comprised 57 solar assets across three states with revenue contracted for an average of 18.7 years. It is “evaluating over 128 deals totalling $4.6bn of potential investment over the next 12 months”. USF’s portfolio comprises 41 assets with 443MW of capacity, 99% of which is in three states, and revenue is contracted for an average 15.4 years.
What are the risks? Dollar weakness would lower returns to UK investors. While the contracts are long term, the pricing terms are not clear and not necessarily fixed. Lower electricity prices would reduce returns but would probably be the result of lower costs or higher efficiency. Higher costs or bad weather could also reduce returns. Overall, the returns relative to the risk look attractive for both funds. They are likely to be a multiple of their current size in a decade.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.
After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.
-
‘I installed a heat pump in my home – here are five things I’ve learnt’
From the size and noise of a heat pump to how much it costs to run one, Ruth Emery reveals what she’s learnt after installing one in her home six months ago
-
3 ways to work out if a stock is good value
The only thing you can really control in investing is the price you pay for an asset – but how can you tell if you’re getting a good deal when it comes to the price of a stock?
-
Two ways to tap into monopoly profits from airports
Most investors can’t get their hands on airports. Here are two ways you can
-
Fat profits: should you invest in weight-loss drugs?
The latest weight-loss treatments could transform public health and the world economy. Should you invest?
-
How investors could profit from Ramsden Holdings' four-part growth strategy
Ramsdens Holdings offers a diversified set of financial and retail services and a juicy yield, says Dr Michael Tubbs
-
How to invest in the booming insurance market
The insurance sector is experiencing rapid growth after years of stagnation. Smart investors should buy in now, says Rupert Hargreaves
-
Tap into investment trusts to profit from private equity
Opinion The investment companies providing access to unlisted firms’ robust growth are looking cheap, says Max King
-
Out of America's shadow: Why Trump's tariff chaos may be good for non-US stocks
Opinion Upending global investment and trade could benefit other countries at the expense of the US market, says Cris Sholto Heaton
-
BP's 'long, painful decline' – and why next year could be even tougher
Opinion Long-suffering shareholders in oil giant BP have been pushing for change. It won’t come soon enough, says Matthew Lynn
-
Investment trusts tap the profits in exotic and obscure global markets
Opinion Peter Walls, manager of the Unicorn Mastertrust fund, highlights three investment trusts as he shares where he'd put his money