Exploring investment opportunities in floating solar farms

By Paul Moody

The global energy transition is opening exciting avenues for sustainable investment, and among these, floating solar farms are rapidly emerging as a significant opportunity. As solar technology evolves, it's becoming clear that the future of solar is not limited to rooftops and land-based installations—it's expanding onto the surface of our lakes, reservoirs, and oceans.

Floating solar farms, or "floatovoltaics," have gained considerable momentum globally. Their appeal is rooted not only in their innovative use of otherwise unused space but also in their impressive efficiency benefits. Floating solar panels naturally cool due to proximity to water, boosting efficiency by approximately 5-15% compared to traditional land-based solar farms. Additionally, they help reduce evaporation in reservoirs, which is particularly valuable in water-stressed regions.

The scale of floating solar is already significant. According to the World Bank, global installed capacity for floating solar surpassed 3 gigawatts (GW) in recent years and is projected to exceed 10 GW by 2030. Countries including China, India, South Korea, and the Netherlands are leading the charge, recognising floating solar as a pivotal component of their renewable energy strategies.

China, for instance, is home to the world's largest floating solar plant in Huainan, boasting a capacity of 150 MW. This project alone produces enough electricity to power approximately 94,000 homes, marking a significant step in China's ambitious goal of achieving carbon neutrality by 2060.

Similarly, India is actively investing in floating solar farms to tackle its land scarcity issues and meet its renewable energy targets. The country recently commissioned a 100 MW floating solar project at Ramagundam, Telangana, aiming for 10 GW of floating solar installations by 2031.

Beyond Asia, Europe is also increasingly adopting floating solar solutions. The Netherlands, constrained by limited land availability, has quickly become a European leader, recently opening one of Europe’s largest floating solar park—a 48 MW facility in Zwolle. This development aligns closely with the EU's aggressive renewable energy targets.

From an investment perspective, floating solar presents a unique opportunity for sustainable investors seeking diversified renewable energy assets. With ESG factors guiding institutional investment decisions, floatovoltaics may offer a compelling case, combining environmental benefits with strong economic rationale.

Yet, like any emerging technology, floating solar faces challenges, including higher initial costs and complexities in installation and maintenance compared to traditional solar farms. However, declining technology costs and advancements in floating platform designs will continue to mitigate these barriers, improving financial viability and scalability.

In addition, floating solar farms complement other renewable resources, effectively balancing electricity generation. Their placement on existing water bodies also reduces conflicts related to land use, an increasingly contentious issue in densely populated or agriculturally dependent areas.

As we consider the future of sustainable investing, floating solar farms represent a promising and increasingly essential element of diversified renewable portfolios. Investors, developers, and policymakers should collaborate closely to address existing barriers and unlock the immense potential of floating solar technology.

The potential relevance of sustainable investment opportunities like floating solar is something CFA Institute understands, and we remain committed to educating investment professionals on assessing and integrating such innovative technologies into their portfolios effectively.

For me, floating solar is more than just a renewable energy innovation—it's a testament to human ingenuity in tackling global climate challenges. As floating solar projects multiply and scale globally, we are witnessing the evolution of an essential tool in achieving a sustainable energy future. The journey of solar beyond rooftops is just beginning, offering substantial rewards for forward-thinking investors and societies around the world.