The UK solar energy sector has the potential to provide lucrative opportunities for investors at a time when inflation is at a 30-year high.

Below, we explain why the ProVen Estate Planning Service (PEPS) has a focus on solar energy.

What is solar energy?

Solar energy is generated from the sun’s rays through panels on rooftops or on the ground.

There are two types of panels:

• Photovoltaic panels, which produce electricity
• Solar thermal panels, used for heating water

The solar sector is expected to grow significantly over the next 10 years as the UK Government looks to meet its legally-binding commitment to hit net zero by 2050. There is currently a total solar capacity of 14GW in the UK, and this is forecast to increase to 35GW over the next 15 years.

Why is solar an attractive investment opportunity?

There are a number of reasons why solar energy provides lucrative opportunities for investors.

1. There is strong Government support

The UK Government is committed to creating cleaner, more affordable energy. The current Ukraine/Russia conflict has shown the downsides of being reliant on other nations for our energy. It makes sense for the UK to produce more of its own energy that has been produced in a sustainable way.

The Government’s recent Energy Security Strategy outlined plans to create an extra 10,000 jobs in solar by 2028 as it expects a five-fold increase in solar panel installations by 2035.

2. Investors could receive reliable income to beat inflation

Many older renewable energy projects receive the majority of their income from Government-backed schemes that are designed to protect against inflation. Many newer projects are backed by inflation-linked long-term power purchase agreements with good quality corporate off-takers.

At the ProVen Estate Planning Service, a high proportion of income within our solar-focused trading companies comes from Government mandated payments linked to inflation indices (known as Feed-in-Tariffs). So, rising inflation means these companies generate higher revenues, meaning the ProVen Estate Planning Service has the potential to offer investors reliable returns.

Our returns are currently at least 4% after fees and costs*. These returns are paid in the form of dividends, which investors can either use to boost their income or to invest elsewhere.

There may of course be higher input prices as a result of rising inflation. But solar maintenance costs are generally low, so overall our projects benefit from rising inflation.

3. Solar panel costs are falling

The price of solar panels has fallen significantly over the past decade, making them more affordable to install and therefore reducing the cost to investors.

In the UK, the cost of solar panel installation per kw has dropped from £2,080 in 2014 to £1,628 - a decrease of 22%, UK government data shows.  

4. There are generous tax incentives

In the UK, if you invest in a company that qualifies for Business Relief (BR) you may be exempt from paying inheritance tax (IHT) on these investments**.

Through the ProVen Estate Planning Service, we offer our investors the opportunity to invest in trading companies focused on the UK solar energy sector that are expected to qualify for BR.

To qualify for IHT relief, your investment must have been held for at least two years at the time of death.

How can investors continue to benefit from the Feed-in-Tariff scheme?

The Feed-in-Tariff (FIT) scheme involved long-term contractual agreements put in place by the Government - lasting up to 25 years - to pay producers of renewable energy a guaranteed, generous rate for electricity generated.

Even though the FIT scheme closed to new projects in April 2019, many of our investments at the ProVen Estate Planning Service are still benefiting from the scheme. And when we negotiate new long-term contracts with businesses, we are still able to secure inflation-linked contractual agreements of up to 25 years for the energy we produce.

What are renewable Contracts for Difference auctions?

In February 2022, the UK Government announced plans to hold annual ‘Contracts for Difference’ renewable energy auction schemes from 2023. Previously, these auctions were held every two years.

The Contracts for Difference (CfD) scheme is the government’s main method of supporting renewable electricity generation.

The scheme guarantees prices for renewable energy suppliers for 15 years. The aim is to incentivise investors to invest in clean energy through the promise of predictable revenues, and to protect consumers from paying higher costs when electricity prices are high.

Developers of renewable energy projects compete to be awarded one of these contracts at auction.

What other Government support is there for solar?

The UK Government is looking at a number of plans to support the fast-growing solar industry.

These include:

• Amending planning rules to make it easier to install ground-mounted solar panels on previously developed or lower-value land.
• The planning process for rooftop solar is also being simplified and the Government is looking at ways to better use public sector rooftops.
• Expanding options for low-cost finance to make it easier to raise the money needed to install solar panels on rooftops.
• Encouraging developers of new homes and buildings to install solar panels.

Meanwhile, there have already been a number of measures introduced to encourage more take-up of solar panels. These include the removal of VAT on solar panels installed on residential homes, saving homeowners up to £1,000.

‍

* No guarantees can be made. As with all investments, your capital is at risk and past performance is not a reliable indicator of future results.

** UK tax rules and regulations are subject to change, and such changes may be retrospective. Your ability to obtain tax reliefs will depend on your personal circumstances.

Investments accessed through the ProVen Estate Planning Service are made into private companies and are deemed to carry a higher risk than many other types of investment. You should read the risks associated with the Service before deciding whether to invest.

This article is for UK residents interested in finding out more about Business Relief and the ProVen Estate Planning Service strategies. UK tax rules and regulations are subject to change, and such changes may be retrospective. Your ability to obtain tax reliefs will depend on your personal circumstances. It is not our intention to offer legal, tax or investment advice, and we always recommend that investors seek professional advice that can take account of their personal circumstances before making any investment or estate planning decisions. An investment in the ProVen Estate Planning Service should be considered high risk and past performance is not a good indicator of future results.

Important notice: issued by Beringea LLP of Charter House, 55 Drury Lane, London, England WC2B 5SQ, registered in England & Wales number OC342919 and authorised and regulated by the Financial Conduct Authority, number 496358.