Meanwhile, as the components whose costliness once limited the potential of solar and wind—namely panels and turbines—improve and gain scale, the economics of renewable generation are fast reaching parity with more conventional generation methods.
From an operational perspective, solar and wind farms typically ink decades-long offtake contracts with investment grade municipalities, utilities and businesses, ensuring that there will be steady, consistent demand for their power and long-term recurring revenue.
Like Other Asset Classes, But Different
With a defined term and consistent periodic income, green power infrastructure assets share some attractive features with bonds as an asset protection strategy. Where assets such as wind and solar differ is that they present an opportunity to add value mid-stream and allow investors to gain more market-agnostic growth without taking on substantially more risk. One example: the life cycle of a wind farm can easily be extended by decades by replacing older, less efficient turbines with newer designs, an approach called repowering.
Meanwhile, green power assets have similar characteristics to real estate investments, such as long-term cash flow and insulation of public market volatility. The key difference is that they’re less susceptible to the boom-bust cycles that real estate is. Power will continue to grow in demand as long as economies around the world expand.
A More Diversified, Steady Approach
One lesson of the past several weeks is that there are generally no short cuts to saving for retirement and other life goals, and, of course, that investing is not a game for the faint of heart.
More tangibly, recent market shocks expose the FIRE movement for what it is: a school of thought that relies on very rosy assumptions that leaves little margin of error or time to recover from relatively minor bumps in the road, much less major downturns such as the one we’re currently experiencing.
Financial planners and advisors working with investors—especially investors who have more runway to go before retirement—should counsel their clients to take this market inflection point as a moment to look at a more diversified, steady approach. Green infrastructure investments can play an important role in protecting assets and generating long-term income in a post-FIRE environment.
David Sher is Co-CEO for Greenbacker Capital, an investment firm focused on the renewable energy space.