In a market environment where interest rates are low and asset classes are becoming increasingly correlated, investors have been turning to alternatives for better diversification and income generation. While there are plenty of alternative solutions in the Canadian marketplace today – such as precious metals, real estate and hedge funds – investors would also benefit from a more pure alternative play.
As a true “alternative to standard alternatives,” investing directly in renewable energy projects such as solar arrays, wind farms and waste-to-energy plants is an effective diversifier because “you’re not just investing in renewable energy securities, you are actually owning the plant, the technology – the whole operation,” says Ajay Hargreaves, Chief Executive Officer, Paulownia Capital. Another bonus: renewable energy projects generate predictable, sustainable revenue streams, making them excellent candidates for income-seeking investors.
Out of the landfill and into the grid: waste-to-energy
Waste-to-energy technology stands out as one of the greatest renewable opportunities today because it solves two major issues plaguing governments worldwide. First, without enough power to service growing populations, power shortages and outages are on the rise.
Second, populations are creating too much waste. In the U.K., for example, 48% of waste is either buried in landfills, which creates unstable communities, or burned, which releases toxic emissions into the atmosphere. Neither of these options is tenable – and there is social and political pressure to find a solution.
Faced with this challenge, the U.K. government has imposed the ambitious goal of reducing the amount of waste that enters U.K. landfills to 45%. How is it enforcing this target? Taxes. Local governments and private corporations once paid £80 per ton of waste. Today, that amount is £120 per ton. Rising taxes are making it prohibitive to be in the traditional waste business.
Waste-to-energy technologies solve these problems, offering a money-saving solution for businesses and an energy-producing solution for local governments.
“By converting what would have once been destined for the landfill or incinerator, we reduce waste and curb the release of harmful emissions into the atmosphere. And by recycling this waste, we produce clean electricity that can be used to power local towns,” says Marc Roberts, Vice President, Paulownia Capital.
Renewable energy projects generate predictable income
The energy output of renewable technologies is predictable, which lends itself to income-oriented investments. With waste-to-energy, the systems manufacturers guarantee the energy output per ton of waste. This means companies like Paulownia Capital can secure future revenue streams and can accurately forecast a project’s income-generating capabilities for decades.
Waste-to-energy is a growing opportunity for income-seeking investors as it is vibrant and not yet widely known. Local governments and private companies across Europe and the U.K. are seeing significant results from existing projects and they are craving more, with billions of dollars in contracts coming on line in the near term.
Not all renewable energy companies are equal
“Renewable technologies will remain financially viable as long as the sun shines and the wind blows,” says Hargreaves. “The secret to a strong renewable energy company is to embrace a range of renewable energy sources rather than be pigeonholed by one technology.”
Waste-to-energy, solar, wind, wood pellets and biomass are among the most tested and predictable renewable technologies in the market today. A company with the expertise to execute on these key technologies can adapt alongside the evolving renewable energy market. These companies can stay at the forefront of change and tailor solutions to a specific region’s needs.
Looking to the future of renewables
If current demographic and environmental trends continue, there will likely be significant growth in waste-to-energy projects over the next 10 years and beyond. Smaller and mid-sized companies will continue to launch new projects and will likely spark the interest of the big energy players, which will further support efforts being made by smaller companies today and support the income needs of investors in the future.
For more information about investing directly in renewable energy projects, visit paulowniacapital.com.
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