Direct and indirect PV investments

Direct and indirect PV investments

How can you as a private individual invest in commercial photovoltaic systems? What forms of investment are there? Find out what the advantages and disadvantages are and what makes direct investment in photovoltaics so exciting.

Investments in commercial photovoltaic systems come in different forms. Roughly speaking, we can distinguish between direct investment, i.e. buying and operating a PV system, and indirect investment, i.e. investing your money in financial products or companies that operate in the field.

Financial instruments for indirect investments include:

  • Cooperative shares
  • Closed-end funds
  • Subordinated crowdinvestments
  • Tradable bonds and shares of operating companies or these mixed into open-end thematic funds
  • Other purely financial investments in operating companies or
  • Umbrella companies that themselves invest directly in PV.

The returns on indirect capital investments in the PV sector currently range from approximately three percent with fixed interest rates and predefined maturity to near double-digit returns on investment forms with flexible maturity.

As an investor in indirect investments, you have little or nothing to do with the operating business and cannot actively influence the performance thereof. This means that both the opportunities and the risks of indirect investments are limited. With the exception of open-end funds, all direct and indirect investments are subject to the entrepreneurial risk of total loss.

Cooperative shares support decentralised renewable energy projects. Since voting rights are not dependent on the number of shares held, energy cooperatives are considered particularly “democratic”. Shares can usually be acquired for as little as €250-500.

Participations in closed-end funds, on the other hand, typically start at around €10,000. You become the limited partner of a limited liability company, partnership, or similar. Liability is usually very limited and there is no obligation to make additional contributions, but total loss is also possible here.

A comparatively new form of indirect capital investment is crowdinvesting. Here, many investors make smaller amounts available to a company for the implementation of a specific, previously known photovoltaic project. The investment amounts start at around €50-500, depending on the provider. To protect small investors, legislation has capped crowdfunded investments at a maximum of €25,000. The maturity is usually fixed for shorter periods, such as 3-4 years. Such investments are often subordinated, so that in the event of insolvency a bank gets its money back first.

In cases of further financial participations in operating companies, an ownership title is acquired, but the operating business is still managed by the operating company.

Investing directly in photovoltaic systems

In contrast to indirect financial instruments, with a direct investment in photovoltaics you become the owner and operator of a photovoltaic system and act as entrepreneur with all opportunities and risks. The equity returns of direct investments in commercial photovoltaic plants start in the mid-single-digit percentage range.

If you own the commercial photovoltaic system yourself, you have the greatest transparency on the revenue side and enjoy full control over operations and expenses. At the same time, you can secure individual tax benefits, such as the “IAB” investment deduction.

Furthermore, with a direct investment in PV, your equity return can be increased disproportionately with a relatively low capital investment, as you have high leverage. With an equity share of 10-30%, a commercial photovoltaic system can usually already be acquired with secured debt financing. Thanks to favourable financing conditions, this leverages the return on equity.

The tradability of PV systems in operation has also improved markedly in recent years. This is due to an increase in both the demand for existing systems and the supply thereof. Trading commercial photovoltaic systems is standardised on marketplaces such as Milk the Sun and has been established for years.

Forms of direct investment

For private individuals, there are different forms of direct investment to choose from. They don’t necessarily have to set out as lone wolves but can also join forces with third parties. This can be done via:

  • Energy cooperatives, founded by private individuals in order to jointly establish and make use of decentralised energy production. For this, the joint cooperative invests.
  • Owner associations, in which private individuals join together for a direct investment.
  • Shared systems, in which each party buys legally independent shares of a large PV system. In this case, each party owns its own PV modules and inverters and holds a share in the common property such as the grid connection or safety devices.

With joint direct investments in PV, it is important that the operational business is the responsibility of all involved owners. The responsibility is always clearly laid out if you own either the entire system or a specific partial system.

In cases of technical systems divided into several entrepreneurial constructs and among several owners, operations are usually carried out by internally contracted managers, which of course has an impact on costs. The tasks of technical and commercial management can be outsourced in whole or in part to specialised service providers.

Which investment vehicle is the right fit?

With each direct investment in commercial photovoltaic systems, you become a (co-)entrepreneur. For the takeover of new and existing systems, operating companies are commonly, but not mandatorily, founded, which you then take over from project developers, installers, or sellers.

Such project companies, whose purpose is the operation of the system including all assets, are referred to as “SPVs” (special purpose vehicles). Project companies can be transferred in various forms in PV transactions:

Share deal: You buy shares in a limited liability company or a partnership. This makes you a shareholder and gives you all the associated rights and obligations in the company. With the purchase of the company, you take over not only the assets, but also the entire company history. However, you do not directly become the owner of the fixed and floating assets of the enterprise, nor do you enter into its liabilities as a debtor.

Asset deal: You do not buy a company and business shares, but rather acquire the assets (i.e. the PV system) and enter into the relevant contracts. Whether you make the purchase as a private individual or through a company is irrelevant.  You do not assume any other risks of the selling company.

The essential question is which option is preferable or even possible in each case. The legal form has important tax and legal consequences. The most practical solution can usually be derived from the construction or life cycle phase of the investment object. You can read more about this in the following articles.

To sum up: through active management, you as an investor can optimise the returns of your PV project. To do this, you must act as an entrepreneur – with all associated rights and obligations. In this, you can rely on the support of a wide field of specialised service providers.


This article was published in our investment guide. For all other articles and information on Direct investment in commercial-sized photovoltaic systems, please visit: Milk the Sun – PV Investment Guide.