Investing in solar fundsWhat to consider when investing in solar power

Climate-friendly and stable: providers promise investors sunny prospective returns if they invest in solar energy. Funding renewable energies appears attractive to many. Where should solar investments be categorised in the spectrum of sustainable investments?

Germany is one of the countries in which the number of installed solar power plants increases significantly year on year. But not everyone has their own roof or space to build a small power plant themselves. Many investors are therefore wondering how they can still benefit from the energy transition.

As a result, the number and variety of offers for solar investments is increasing, which makes it confusing for retail investors, especially as transparency often leaves much to be desired: Exactly which assets are invested in? What returns are realistic? How safe is the investment? And what is truly clean energy?

This article highlights the opportunities and risks of solar funds. It provides clarity on how solar energy funds work and what alternatives there are to invest in the power of the sun.

Solar funds: everything you need to know when investing in solar power

How solar energy works

Photovoltaic (PV) converts incoming sunlight directly into electricity. PV systems are particularly popular in Europe. Three things are needed to convert the power of the sun into usable energy:

1. solar cells that can be combined to form modules and entire photovoltaic systems – and a suitable surface for
2. the power grid which absorbs and transports the DC energy generated by means of inverters,
3. Sunlight, which also occurs in cloudy conditions, but not at night, and is significantly reduced in snow or persistently cloudy weather 

In solar thermal power generation (solar thermal energy in a broader sense), the heat of sunlight is concentrated in order to heat a carrier medium (e.g. air, oil or water) and thus drive a turbine for power generation. Thermal conversion is more worthwhile in regions with a lot of sun and few clouds, such as the deserts of Africa.

What is agri photovoltaics?

Agri-Photovoltaics (Agri-PV) combines agriculture and electricity generation on the same area. Specific carrier systems with optimised heights and spacings allow the arable plants to photosynthesise. In hot years, intermittent shade can even stabilise the harvest.

Demand is growing rapidly. Figures from the Fraunhofer Institute show that the global output of agri-PV systems increased from 5 megawatt peak (MWp) in 2012 to more than 14,000 MWp in 2020. For Germany alone, the technical potential is 1.7 terawatts peak, 120 times the power currently installed worldwide.¹

What are the benefits of Agri-PV for investors?

Agri-PV offers two benefits:

1. Tight areas can be used much more efficiently because the same area generates two yields.
2. Shading stabilises harvest yields during hot years while strengthening biodiversity and social acceptance in the local community.

“This flexibility maximises area efficiency without significantly restricting agricultural production,” says Timo Werner, fund manager of klimaVest at Commerz Real. “Research projects in Germany and Europe show that, for example, berry shrubs and vegetable species under agri-PV shade often have a higher quality and resilience against drought or bad weather.”¹

Practical example: Agri-PV project in klimaVest’s portfolio

One of Germany’s largest agri-PV parks is currently being built in Schönefeld near Berlin. "klimaVest secured the project early on in the planning phase. It combines agriculture, electricity generation and biodiversity on the same area and shows how agriculture and the energy transition can go hand in hand," says Timo Werner, fund manager of klimaVest at Commerz Real¹. For another solar park in the klimaVest portfolio, the meadow under the elevated modules serves as pasture for the sheep herd of a local breeder.

For its investors, klimaVest thus enables access to a new market segment with growth potential, which offers additional diversification and new opportunities in the fund portfolio.

How do investors make money with solar parks?

Solar farms generate their income in three ways: through guaranteed EEG feed-in tariffs, through long-term power purchase agreements with large customers (PPAs) and through direct sales on the spot market. The path that dominates has fundamentally shifted in recent years.

In Germany, the Renewable Energies Act (EEG) has been ensuring since 2002 that electricity from renewable sources has priority for feed-in to the grid and that producers receive remuneration per kilowatt-hour (kWh) fed in.

But the model is undergoing a revolution. "The state funding phase of the energy transition is coming to an end. More and more wind and solar plants are losing their guaranteed remuneration and have to assert themselves in the volatile electricity market," says Timo Werner, fund manager of klimaVest at Commerz Real.² For new solar parks, spot market prices and PPAs currently determine the earnings situation. With PPAs, industrial customers or energy suppliers secure solar power for ten to fifteen years at a fixed price. This creates planning security on both sides and stabilises revenues for solar farm operators.

Each kWh generated with photovoltaics avoids the emission of around 523 g of greenhouse gas emissions³ that would otherwise have arisen in the average German electricity mix with its high proportion of fossil energies such as oil, coal and gas.

Photovoltaics covered around 14 percent of Germany’s net public electricity generation in 2024, making it the second most important power source after wind power.⁴

What is a solar fund?

A solar fund pools the capital of many investors to finance and operate solar parks. Investors do not need their own roof or property to participate in the income from solar energy. With this form of environmental investment, several private individuals and companies generally finance a solar park together. Usually, the modules are located on a larger area and are connected to the grid as one power plant. 

A financial investment in solar funds goes into the construction and operation of several solar systems, which can be located in Germany as well as in other countries. A return can be generated by marketing the generated electricity (via EEG feed-in tariffs, PPAs or spot market) as well as via the long-term performance of the assets. This is particularly useful when the solar power plants are large and have a long runtime - i.e. through economies of scale and long-term investments.

Closed-end and open-end solar funds

Closed-end solar funds are initially opened when they are launched. Individuals and companies can combine their money during a fixed investment period ("subscription period"). With their direct business participation in solar parks, investors acquire shares. These are often limited partnership interests in a joint company, which is organised in the legal form of GmbH & Co. KG (limited partnership with limited liability).

Many citizen solar parks are also organised in this way: investors become limited partners. As soon as a certain equity ratio has been reached with investors’ individual investments and the planned solar power plant is thus fully financed, the fund will be closed. Further deposits are no longer necessary or possible in such a closed-end fund.

Closed-end funds are allocated to alternative investment funds (AIFs); the units cannot be traded on the stock exchange. This makes investing capital less speculative, but also less flexible if investors want to get their money back before the contractually set, usually long-term holding period.

Open-ended solar funds, on the other hand, are traded on the stock exchange as investment funds. Those who invest in solar energy via an open-end solar fund can buy and sell their units daily.

Here, investors do not specifically invest in the construction and operation of certain projects such as solar parks, but in shares of companies active in the solar industry. This includes manufacturers of solar cells, solar modules and inverters, consultants, service providers, and solar system builders and operators. As share prices can fluctuate in value, a holding period of eight to ten years is recommended despite daily trading.

The impact on sustainable projects is rather indirect in this form of investment. After all, buying such an exchange-traded security usually does not let money flow from the financial economy into the real economy, but rather to the previous owner of the share certificates.

If the stock market price rises, the companies in the fund’s portfolio may receive light loans from banks due to their higher value. However, it is up to them whether they really finance sustainable projects and business models within the company - investors do not have any transparency about this.

In addition, you will also continue to hold all the usual risks of stock market investments in the portfolio.

The opportunities and benefits of solar funds

Anyone who is directly involved in the construction and operation of a solar power plant invests in tangible assets. If you choose to do so, you will become an entrepreneur and co-owner of solar parks and actively contribute to the energy transition.

Photovoltaics delivers clean electricity without greenhouse gas emissions during operation - at ever-decreasing costs. The power requirement is usually highest at noon: just when the sun is shining the brightest. The power peaks of the solar systems therefore usually coincide with the peaks in demand on the power grid.

Overall, demand for electricity will increase – and the need for green energy in particular. Germany has decided to phase out both nuclear power and coal power, and renewable energy is expected to fill the gap. Other countries are also increasingly relying on energy production from renewable sources in order to become more independent of expensive oil or natural gas and coal imports and diesel generators, for example.

The returns of solar funds

The return on solar parks and thus solar funds can usually be calculated well: Existing plants often continue to benefit from the EEG remuneration guaranteed for over 20 years. In new solar parks, long-term electricity purchase agreements with large customers (PPAs) often secure a fixed price per kilowatt hour for ten to fifteen years, thus ensuring predictable yields.

The fact that annual fluctuations in solar radiation are rather low also ensures stable income – electricity revenues can therefore be easily predicted.

As tangible assets, green investments in solar energy are largely independent of capital market fluctuations, inflation, exchange rate risks or economic cycles, especially as the energy generated can primarily be fed into the grid and thus always finds its way to the electricity market. The sophisticated technology is controllable and reliable, which means low maintenance and insurance premiums.

With all these foundations for a calculation, fund companies can draw up relatively reliable return plans. Solar funds are therefore well-suited as an addition to a diversified portfolio.

A holding in a solar fund offers good potential returns, but it also poses a significant business risk.

What are the risks of solar funds?

Anyone who wants to invest in solar plants with a closed-end solar fund is taking an entrepreneurial risk. Currently, the greatest risk lies in the marketing of the generated electricity. With the expiry of the state-guaranteed feed-in tariffs, new solar parks are increasingly dependent on the volatile electricity market. “Where guaranteed revenues used to attract, spot market prices, weather data and network capacities now determine the revenue side,” says Timo Werner, fund manager of klimaVest at Commerz Real.¹

Werner also points to a technology-specific effect: On sunny days, many solar power plants push down the price of electricity precisely during the hours they produce themselves - down to negative prices. This cannibalisation reduces the average revenue per kilowatt hour of solar power.

There are several ways to counteract this. "As an investor, if you want to stabilise your returns, you have to think about new infrastructure: Power grids and battery storage are becoming key components of stable tangible asset portfolios," says Werner.  Long-term PPAs secure fixed prices per kilowatt hour over ten to fifteen years, hybridisation combines solar with wind or battery storage on a grid connection and smooths the feed-in profiles. A broad spread across several production types and locations further reduces the vulnerability to cannibalisation. Pure solar funds only represent these levers to a limited extent. Diversified renewable energy funds that combine several technologies and locations have a structural benefit here.

Interim summary: Are solar funds suitable for private investors?

Solar funds are only suitable to a limited extent for private investors. Anyone who wants to invest in solar energy with a solar fund makes an entrepreneurial investment that does not seem very attractive to security-oriented investors due to long maturities, possible total losses and today’s high dependence on the volatile electricity market. Knowledge is also needed to thoroughly assess potential investments.

But in principle, solar power is a sustainable form of energy generation. For a long time now, renewable energies have no longer been referred to as “alternative energies”, as the energy transition itself seems to be without alternatives: In view of climate change and natural loss, clean solar energy belongs to the future. Investors therefore need broader ways to participate in the growth of renewable energies - for example, through funds that spread weather and electricity price risk across multiple technologies and regions. “Broad diversification makes renewable property portfolios resilient and supports long-term stable and attractive risk/return profiles,” writes Dr Nicole Arnold, Member of the Management Board of Commerz Real.⁶

Alternatives – how to participate in solar parks and invest in solar energy

As with other financial investments, the various forms of investment in solar systems also have advantages and disadvantages that investors must assess for their individual case.

Solar equity funds

In a solar equity fund, the shares in various companies in the solar industry are bundled into one fund. In such a thematic fund, the risk is more diversified than when investing in individual shares.

For actively managed equity funds, fund managers select and weight equities. This saves investors time, but corresponding fees are payable. This type of investment has no influence on the direct expansion of solar parks and other renewable energy sources.

European Long-Term Investment Funds (ELTIFs)

The ELTIF is a European investment fund that opens up access to tangible investments in the real economy for retail investors. Unlike a solar equity fund that invests in shares of companies in the solar industry, the capital in an ELTIF flows directly into real projects - i.e. the construction and operation of solar parks, wind farms, power grids or battery storage systems. At least 55 per cent of the fund assets must flow into such qualified investments in tangible assets in accordance with EU requirements.

For investors who want to invest in solar energy, this design has several benefits over traditional solar funds:

• The income comes from ongoing electricity sales, long-term electricity purchase agreements and feed-in tariffs and is spread over several plants and locations instead of being dependent on individual solar parks.
• Unlike pure solar funds, ELTIFs can combine solar with wind, electricity grids or battery storage.
• They are strictly regulated by an EU regulation and offer uniform investor protection across all Member States.
• In semi-liquid form, they enable regular redemption windows over the term, while the capital is tied up until the end of the term for closed solar funds.

As tangible asset investments, ELTIFs can thus be both a source of return and a stabilising element in the custody account. The focus of the ELTIF market in Germany is clearly on infrastructure and renewable energies: By the end of 2025, infrastructure accounted for around 60 percent of the German ELTIF volume.

With around 36.8 percent of the German ELTIF volume, Commerz Real’s klimaVest ELTIF is the largest product on the local market and invests mainly in European solar and wind farms as well as electricity transmission networks, and in the future also in storage solutions.⁷

Solar bonds

With bonds, solar companies receive loans from investors and pay them a fixed interest rate in return. These regular distributions provide planning certainty.

On the other hand, as a lender, there is less transparency about the performance of the investment. There is often no market for trading bonds, so the financial instrument is relatively inflexible.

Crowdinvesting in solar energy

In crowdinvesting, many investors ("crowd") participate financially in a project - e.g. the construction of a solar park. The return is usually paid out as interest. It is often possible to invest amounts from as little as 100 euros via online platforms. The contracts between the project company and the investor are often arranged as profit participation certificates or subordinated loans.

Profit participation rights are securitised in a profit participation certificate: The security entitles investors to participate in profits and proceeds in the event of the dissolution of a company (liquidation). Such contracts can have very different structures in terms of interest, profit distribution, repayment and rights. There is no right to have a say and, in the event of insolvency, beneficial owners are only in turn after all other creditors.

In subordinated loans, investors receive relatively high interest on the loan they grant to the solar project or company. However, there are relatively high risks - in the event of insolvency, investors are served subordinately to all other creditors.

Cooperatives

In a cooperative, investors become co-entrepreneurs or co-owners through their contribution. These companies are often deeply rooted in their region. Each member has a say, regardless of the amount invested. This has advantages (democratic investment form), but can also lead to protracted coordination processes. An experienced management team is also crucial here.

Investing in solar power systems: Covering own needs

Another way you can invest money in solar energy is to invest in solar systems for your own needs. Photovoltaic systems do not actively build up wealth, but you can optimise your costs.

The economic leverage has shifted in recent years: Whereas the state feed-in tariff used to be the decisive factor, today it is primarily self-consumption. Every kilowatt hour consumed saves the full gross electricity price of currently around 36 cents. The feed-in tariff for new partial feed-in systems up to 10 kWp, on the other hand, is only 7.86 cents per kilowatt hour.⁸

Keep an eye on the purchase costs: Conventional PV systems in detached houses have a size of 8-15 kWp and pay for themselves after approx. 9 to 13 years. If you also opt for an electricity storage system, the payback period will increase to an average of 12 to 18 years. But in the end, you also save more electricity costs. Storage units increase the self-consumption rate from around 30 percent to up to 70 percent.⁹