The solar asset class provides rich ground for investors seeking compelling risk-adjusted returns. With respect to real estate and other infrastructure, solar project investments compare favorably from both a risk and returns perspective.
Significant customer demand and falling costs continue to drive the expansion of the solar asset class. In 2018, there were around 109,000 megawatts of solar installed worldwide, with 14,000 megawatts of that capacity installed in the United States. Looking ahead, we still see a tremendous pipeline and significant investor demand. Globally, solar will become one of the dominant sources of new electricity generation, and solar and wind are expected to provide 50 percent of all electricity in the world by 2050: a roughly $10 trillion market.
Solar assets within the United States are especially attractive for investors because they are dollar-denominated, real assets, non-correlated to the stock market, and are also relatively inflation-insulated. Europe and Asia also have specific requirements for banks to invest in renewable energy, as it reduces their capital set-aside requirements. Many sovereign wealth funds and multilateral banks have a mandate to invest in renewables. As such, there continues to be a number of new investors in the market from Japan, Europe, the Middle East and China.
Amidst a shifting landscape in 2020, the solar industry remains a growing multibillion-dollar market for investors, customers, and entrepreneurs. But it is also a complex one. New investors and developers must be strategic with how they approach the market.
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