Are giant solar farms the income opportunity you've been looking for? (2024)

You would think a field with 160,000 solar panels in the heart of the Oxfordshire countryside would be easy to find.

It isn’t. You can drive for miles past open fields, secluded forests and pretty villages. There are sheep, horses and even llamas. But no sign of solar panels.

It’s there, though — a 127-acre farm generating enough electricity for 10,000 homes. And incredibly, it’s also delivering a handsome return for investors who have taken a punt on it.

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There are 465 solar farms in Britain, and 184 of these sprung up last year.

As a result, investing in renewable energy has become increasingly popular — particularly as they pay a reliable income of around 6 per cent a year. That far outstrips anything you can get from a bank savings account and is double what a ten-year UK government bond pays.

It may be open to debate over whether they will solve the nation’s energy problems, but could they solve pensioners’ income crisis?

The Kencot Solar Farm on the edge of the Cotswolds is about the size of 72 football pitches, and is owned by the Foresight Solar Trust — one of six renewable energy investment trusts that you can buy a share of on the London Stock Exchange.

So where on earth is it?

After multiple wrong turns, I call the fund manager who is waiting for me at the site. Eventually I’m directed down a narrow country road, barely noticeable from the main road.

After half a mile it opens out into a dusty car park marked out by a long fence. There’s a portable toilet and a cabin for a security guard — but still no panels.

Remarkably, I’m actually only a few yards from them.

‘This is the whole point,’ says Foresight Solar fund manager Jamie Richards. ‘We don’t want these solar farms to be intrusive.’

Investing in a solar fund will not make your money grow significantly. But with an income of around 6 per cent, it is certainly far better than anything on the High Street.

It is why many experts say they are a good fit for people looking for income in retirement.

That income comes from the energy the farms sell and from the subsidies paid to them by the Government.

These subsidies are said to be guaranteed, but there is a risk — albeit a remote one — that there could be a major policy change and the Government could tear up the contract. If that happened, each farm would lose half of its revenue.

This site was an airfield until the Seventies, then a developer turned it into a golf course and it later became a motocross course.

The land is not of high enough quality for animals to graze on and doesn’t fit the infrastructure requirements needed to build housing. A solar farm seemed perfect.

The height of the panels is restricted to hide them as much as possible. On one side a hawthorn hedgerow has been planted to screen them from neighbouring farmland.

The panels here stretch out across two fields. It took 330 people four weeks to install them, driving metal pilings one metre into the ground and attaching the rows of panels on top.

The wiring took longer. In total the farm took three years from inception to connection to the grid. It generates around 37 megawatts.

The work was funded by a major utility company and then investment house Foresight purchased it once it was complete and now runs it.

‘We don’t want to take any construction risk for our investors, so we only get involved when a farm has been completed, and it has to be to our specification,’ says Mr Richards.

From an investment point of view there is a clear attraction. The costs of installing solar panels have fallen by 80 per cent over the past five years and there has been a massive drive by the UK government to increase its renewable energy capacity.

Output of solar farms — measured in megawatts, or gigawatts — is dependent more on the amount of light there is than the amount of sunshine.

So, the predictability of the UK’s daylight hours means the production of these farms can be accurately forecast. The only time the panels don’t work is under heavy snow.

Currently around 8 gigawatts is produced from renewable energy (solar, wind and other forms) across the country, only about 2.7 per cent of total demand, but up from 5 gigawatts in March 2014. The aim is to increase this to 20 gigawatts by 2020.

Meanwhile, global demand for energy has tripled over the past 50 years. It is set to rise another 37 per cent before 2040.

With billions of pounds of savers’ cash looking for a home that will pay them income, it could be a good match.

Ben Yearsley, head of investment at broker Charles Stanley, says: ‘The benefit of investing in solar through a trust rather than having panels on your home is the advantage of scale: costs are cheaper and profits are greater and the steady, inflation-linked income paid makes them very similar to investing in a bond.’

Juliet Schooling Latter, director at funds rating agency FundCalibre, says: ‘People have dismissed renewable energy in the past because they were concerned that indebted governments would cut subsidies and they wouldn’t be profitable.

‘But today, many wind farms in particular can compete with traditional power stations even without subsidies.’

Certainly, a lot of the growth has been fuelled by subsidies paid by the Government. Previously, a developer needed only to build a solar farm to qualify for a subsidy. This was an inflation-linked amount each year and led to the boom in solar farms.

Since March, any new solar farm has to prove it is efficient before being granted a subsidy.

What hasn’t changed is that the amount paid is protected for the life of the farm — typically 25 years — so investors won’t find themselves high and dry while the contracts stand.

That’s crucial, as around half of a solar farm’s revenue comes from the subsidies. Energy produced and sold accounts for the rest.

After 25 years the solar farm is either refinanced with new equipment installed, or it is packed up and taken away. Because the infrastructure is so unobtrusive the hope is that a relatively unscathed site should be left behind.

Mr Richards says: ‘Building the site is simple, operating the site is simple and maintaining it is simple, too. And the technology is being constantly improved, so the materials get better and cheaper.’

It cost about £37 million to build this solar farm. But running costs are low — accounting for just 20 per cent of revenue. Computer systems monitor production constantly and there is insurance in place to cover any loss in output and equipment replacement.

Many people’s objections to renewable energy are that solar panels and wind turbines are a blight on the countryside, that the latter are noisy and that the UK climate can render them pointless.

Well, on this sunny day, the only sound is the twittering of a pair of Skylarks. Ecologists visited the farm last week and found two pairs of the birds nesting, as well as lizards and snakes on the edge of the site.

As for output, Mr Richards says: ‘The UK isn’t known for its sunny weather, but it is relatively predictable, and that means we can make very accurate estimates about how much we produce and what our profits will be.’

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