Income Investments

by Tom Konrad Ph.D., CFA An updated version of this article is available here. After a painfully long wait, community solar (also called shared solar) is finally coming to New York state. After years of regulatory uncertainty, the state Public Services Commission (PSC) has put enough of the enabling regulations in place for a number of developers to move forward. What is Community Solar? A community solar installation is a large scale (typically 1 to 3 MW, or the size of about 150 to 800 residential solar installations) in which subscribers can sign up to lease or purchase a share of the production...

By Tom Konrad, Ph.D., CFA A reader of my recent article on Yieldcos asked which share class of Clearway Energy was the better to buy for tax purposes: Class A shares (CWEN-A) or Class C Shares (CWEN). For tax purposes, they are identical.  They pay the same dividend, and it is treated the same no matter which share class you buy.  The reason many large investors often trade CWEN rather than CWEN-A is because it is more liquid.  As I write on Jan 23rd, Yahoo! Finance puts the 3 month average share volume for CWEN at 1,372,714, while the corresponding number...

By Ishaan Goel WHY COMMUNITY SOLAR? A home solar system is a great investment, with financial returns far in excess of any financial investment that has comparable risk. It’s also a tangible step a homeowner can take to help the environment.   Unfortunately, most New Yorkers (and Americans in general) can’t install home solar.  They may be renters, or have roofs that are too old or shaded.  Or they may not be able to afford the up-front cost, or not have enough income to take advantage of the tax credits. That is why New York’s electricity regulator, the Public Service Commission, created community solar:...

by Tom Konrad Ph.D., CFA This morning, hedge fund Water Island Capital called on Pattern Energy (PEGI) Shareholders to vote against the merger with the Canada Pension Plan Investment Board (CPPIB). Water Island claims the merger is undervalued compared to the recently surging prices of other Yieldcos, and that PEGI would be trading at over $30 given current valuations.  There are not a lot of other Yieldcos left, especially if we eliminate those with their own special circumstances.  These are Terraform Power (TERP) which is subject to its own buyout agreement with Brookfield Renewable Energy (BEP), and Clearway (CWEN and CWEN/A) where...

by Prashant Vaze, The Climate bonds Initiative In January, authors from several institutions under the aegis of BiS, published The Green Swan Central banking and financial stability in the age of climate change setting out their take on the epistemological foundations for, and obstacles against, central banks acting to mitigate climate change risk. The book’s early chapters provide a cogent and up-to-date analysis of climate change’s profound and irreversible impacts on ecosystems and society. The authors are critical of overly simplistic solutions such as relying on just carbon taxes. They also recognize the all-too-evident deficits in global policy to respond to the threat. In short, they accept the need for central banks to act. The Two Arguments  The paper makes two powerful arguments setting out the challenges central banks face using their usual mode of working. Firstly, climate change’s impact on financial systems is an unknowable unknown – a...

By Tom Konrad Ph.D., CFA Despite a run-up in the fourth quarter of 2023, it has been a long time since valuations of clean energy stocks have been this cheap.  Perhaps it is worries about hostility towards clean energy under a new Trump administration, or disappointment at the slow implementation of the Inflation Reduction Act.  Whatever the cause, prices are low, and many clean energy stocks are likely to  produce good returns even if the political climate turns further against them. This is especially true for companies that are less dependent on favorable policy or subsidies.  For instance, Yieldcos, high...