Renewable energy trusts invest in wind and solar generation and are popular with investors due to their high, inflation-linked and government-backed yields. The average investment trust within the Association of Investment Companies (AIC) Infrastructure - Renewable Energy sector is trading on a 9.6 per cent premium to net asset value (NAV). The yields these trusts are currently generating have been partly driven by generous subsidy schemes, with around 60 per cent of fund revenues coming from this source. But March saw the closure of an important subsidy – the Renewables Obligation Certificates (ROCs) scheme – to new projects, raising the question of how renewable trusts will continue growing in future.
Launched in 2002, ROCs were the government’s primary way of subsidising large-scale renewable energy projects in the UK. They were issued to producers of renewable energy accredited by energy regulator Ofgem for each megawatt hour (MWh) generated and lasted for a period of 20 years, as well as being linked to retail prices index (RPI) inflation. These certificates could then be sold to other energy suppliers, as part of the Renewables Obligation that required all energy generators to deliver a chunk of their energy from clean sources.