Ask HN: Would you want to buy direct, fractional ownership of a solar farm? | Hacker News Reader

Ask HN: Would you want to buy direct, fractional ownership of a solar farm?

9 pointsshaburn41 comments

Hypothetically speaking, not a solicitation.

No. Because if they’re offering it to me they’ve been turned down by millions of more qualified investors for some reason.

Hypothetically and probably but doesn't necessarily mean its a bad investment or bad exposure to solar farms.

its probably worse than stocks, like a solar etf

Stocks are hard to compete with. The goal is to be a more pure play on electricity driven from solar vs solar ETFs trying to capture who knows what of the solar value chain. Electricity and real estate prices have trended up nicely over the decades and will be in demand as long as civilization is.

It depends where the solar farm is, how new it is, how much a share costs, what the management is like, and what the company’s financials were like. So maybe.

I believe the standard legal vehicle would be a corporation so that investors aren’t liable for any debts or lawsuits. Just issue shares.

There is already a company which is doing similar thing in the UK for Wind Farms. I can't find the name right now though, they were featured on the Fully Charged youtube channel.

I am not in the UK, and I'd gladly invest in a solar farm as a "community member" to cover my own usage but in my country noone is doing it - and probably I would not trust them either (eastern EU). I was actually looking for this a few weeks ago, and the only thing I found is that I can sponsor some African farms through some EU scheme.

In any case, if someone knows some good solar farms which have this community ownership model, I'd be happy to check it out.

I think the Wind Farm was this one from Ripple: https://www.youtube.com/watch?v=65rlHr6ey4I

Insufficient data. Do I get a preferred return on my investment? What does the sponsor’s promote look like? What’s the fee structure?

These are the first few threshold economic questions that need to be answered before I could even begin to start considering this investment (and this obviously disregards any of other threshold questions around the project itself and the sponsor).

Actually, I do have sufficient data to answer this question for me personally - no. This type of investment is only going to attract dumb money, and if I’m going to invest as dumb money (which I most certainly am, in just about any passive investment I can imagine), I’m going to put it into index funds where I pay fees of ten bps or less. Not in an undiversified single project subject to all kinds of uncorrelated risks.

Hypothetically. Ideally. It would be fractional shares of common stock in a company that included the real estate and all components up until the watts were sold on the wire to the grid operator or long term contract to another party.

Also, ideally, that fractionalization would provide some kind of liquidity and diversification across projects/regions.

All ETFs operate at a level above this. They do not operate entities or even do a great job at modelling assets(go look at the contango of USO((the largest US oil ETF)) and the WTI West Texas oil price it proports to reflect; its trading paper assets with management cost layers beneath and trading fees of all sort, reflected and not).

So, that to me sounds like equity in the parent company of an operating business. Which may well be a very worth investment! But not for me on the risk/reward scale.

I’m not sure why you’re bringing up the commodity ETFs, but 100% agree with you, those are a mess and I personally wouldn’t touch them.

I’d like our local utility to support community net metering.

Some neighbors live under trees, and spent 2x more on solar than us for less production than we get. Half our roof is panel free. There’s clearly some efficiency being left on the floor in the current billing set up.

(Also, people in apartments don’t have roofs.)

Does it pay dividends? What are the risks and earnings projections? Are there similar projects? Has the developer done similar work before?

Thanks for the great questions.

Dividends: possibly and ideally for US tax purposes. More importantly powerplants tend to generate persistent income(not necessarily profit)as long as they produce power, so this would be a yield product more than growth(ie most YC startups). It may however make more sense to set them up as pass through vehicles that send income to owners instead of dividends, but it's too early to say and legal needed.

Risks: The same as most other US solar farms(generic I know but could probably find it in a public filing for actual farms later) but what would be unique are A. potential conflicts of interest between the ownership structure such as control(ie scenario some owners want to upgrade equipment down the road vs some wanting to sell the real estate for a capital gains profit) and B. Potential conflicts between the seller, especially related to sophistication, or lack thereof, and the buyer; be the seller the platform or a user on the platform. C. One potential risk mitigation factor that could be unique is creating some type of more liquid vehicle like a SAFE for Solar. *Exceptional project risk at the moment is actual access to panels without delay.

Earnings projections: these are way too project specific. However, they will have an implicit inflation hedge on two fronts(above the yield projections) as real estate and electricity rates tend to move in correlation with inflation; where typical income products like bonds generally do not. Earnings can also be done by long term contract with credit worthy counter parties such as google(usually at discount) or float on the open market with insane volatility in states like Texas. In theory, they are more analogous to a building for rental purposes and you select between a corporate tenants or hotel stays; except electrons are a ubiquitous commodity.

Similar projects: TBD and unique to each product

Developer: TBD and unique unless a great developer(s) could be selected.

Well, can I also remotely use the energy? I would like to buy 1KW with battery storage along with 999 other people to remotely operate 1MW machines 1/1000 of the time. Like remote 1MW robotic steel forging presses. Or to remotely drive around a 1MW bulldozer. I would like to light up 1MW of GPUs from time to time. It would be lovely to do some 1MW resistive heating Photonicinduction style: https://www.youtube.com/@Photonvids It be really cool to fire up a 1MW ECM machine from time to time. A little rock crushing would be fun and of course such a fractional ownership should include access to a 1MW arc furnace. So yes! you have my vote for fractional ownership of a solar farm, but only if it includes access to an industrial fantasyland folly-plex.

No. It would be a financial investment.

There are several apps doing the rounds, offering exactly this on the PlayStore and promising regular returns. I'd ask for their previous track record, including in-person visits to the sites they have already setup before parting with any money.

Hell no. I can smell the scam from here.

How so?

Classic scam: real-estate project with large capital outlay. Results to be seen far in future. In truth, guys running it just run away with the money.

What do you mean by "Results to be seen far in future."?

Hello, would you like to invest in fractional ownership of solar. When we build it after we get capital, you will get x% of the money.

This is how the scam is usually run. And it is run so often that people find immediate other obfuscations: "Unlike the other guys, we've already got the farm built. We're just selling a stake in it so that we can set up a new one.". You buy it, the damn thing turns out to be on its last legs and dies. Or some such thing.

Information asymmetry is what is being exploited here.

Those conflicts may exist and be mitigated through a variety of means with good structures and good actors, especially in the US. You are correct that information Asymmetry of sellers exists, as it most often does, especially in markets less liquid and reported on as public equities. However, most of what you are saying exists in every real estate and especially real estate development transaction.

No. Centralized solar seems like the worst of all worlds to me.

It is often 2-3X cheaper than rooftop solar so how come?

Price is not the selling point of solar. Grid-independence, climate, resiliency in the face of systemic collapse are.

Therefore net new expansion widely further achieves those means.

This reminds me of Ponzi schemes that once mushroomed in India. The scheme went something like this: A company would ask people to invest in a (rubber/teak/sandalwood) plantation project. The investors had to pay the company to buy and plant trees on their behalf; and the investors would get the return after, say, 20-30 years once the plantation started generating profits.

Oh. Interesting. Well the wealthiest of investors here in America buy "solar farms" the are large scale solar powerplants on real estate that sell ubiquitous electrons to the grid and renewable energy credits nearly perpetually(not including downtime from sun and repair).

It depends on how taxes work. And how much it generates in power. If theoretically you could get it to a point where I could buy just the power that I use and It could be paid in power therefore not generating taxable income you could end up getting some advantage. Otherwise no

Very interesting idea and possibly a legal accounting basis. Possibly a "wash sale"

Need more info - are you talking about ownership of the real estate and hardware? Or ownership of the company operating the system on that infrastructure? Those are very different models with different considerations as investment vehicles.

Ideally, it would be everything. Real Estate and all. To get exposure to the power plant the same way the largest investments do but fractionalized.

Community Solar is becoming fairly common!

This is common ownership of an asset proposition; community solar is a separate product.

For the right price every investment is good. The difficult part is to know what the right price is.

If it’s a publicly traded company and the price is right.

Why not private?

Depends on the price and conditions.

No.

it depends.

yes

Yes or no.

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