EP151 · Economy · first published 2022-09-04
Investing in Renewable Energy | Jussi Lilja and Otto Pöyry | Neuvottelija 151
Jussi Lilja and Otto Pöyry of Korkia explain why their fund invests in the project development stage rather than in completed power plants, where institutional money is already crowding in. The episode covers the roughly 95 per cent collapse in solar panel prices, the logic of industrial scale, the role of a local partner in every market, and why subsidies are now seen as political risk rather than advantage. It includes a concrete example from Spain, where one plant gave rise to a local maintenance company. It closes on whether energy infrastructure is becoming an asset class alongside equities, fixed income and real estate. Commercial collaboration with Korkia. Published 4 September 2022.
Investing in Renewable Energy | Jussi Lilja and Otto Pöyry
Summary: In episode 151 of the Neuvottelija channel, Sami Miettinen interviews Jussi Lilja and Otto Pöyry of Korkia about how renewable energy is invested in once the question is no longer ideological but a return calculation. Published 4 September 2022.
Commercial collaboration. The episode is made in commercial collaboration with Korkia, stated in its opening seconds. The guests describe their own fund’s strategy, and the episode is not investment advice.
Why project development rather than a finished plant
The commercial core of the episode is where in the value chain you place yourself. Korkia’s fund does not buy completed, operating plants; it finances project development — the stage that takes a project to construction readiness.
The argument has two parts. First, the guests see this stage as the bottleneck of the value chain: construction-ready projects are scarce relative to the money waiting to build. Second, the completed-plant end is crowded, and that shows in pricing — institutional money seeks lower risk and accepts reduced return expectations in exchange.
Risk is managed not by picking the one right project but by number: several countries, several partners, and enough projects that no single failure decides the outcome. The guests’ own phrasing is that you should always check the pipeline — is the money going into one project, or into sixty or seventy. Some projects will certainly fail, and that is part of the model.
Capital is drawn on a capital call basis. One precise regulatory detail comes up here: investor categories are treated differently, and for experienced non-professional clients the capital must be called in one go.
The price collapse that made solar mainstream
The clearest number in the episode is the roughly 95 per cent fall in solar panel prices over about a decade. The guests attribute much of the industry’s transformation to it: panels come from enormous factories, the hardware is standardised, and installation is fast — in practice aluminium mounting frames and highly standardised panels from quality so-called tier 1 manufacturers.
Speed and standard components also explain why solar has overtaken wind in new capacity growth. The second explanation is permitting: a solar project’s permitting is faster, because a wind turbine rises above the treeline and therefore raises local questions that delay the development stage.
Industrial scale and grid connection
The guests draw a sharp line between a row of panels at the edge of a field and their own business: this is industrial scale. The logic lies in fixed costs and above all in grid capacity — once a connection point has been secured, its use should be maximised. Hence the trend towards ever larger single sites.
The international footprint follows from the same reasoning: solar yields more further south, but in every country the work is done with a local partner. No attempt is made from Finland to influence local permitting authorities; the local operator handles the physical development and the fund contributes umbrella-level expertise and networks.
The Spanish example: a power plant and a maintenance company
The most concrete passage concerns a solar plant completed in Spain near the Portuguese border. The area suffers from unemployment, and alongside the project a maintenance company was built from local operators to look after the plant.
The guest reports a consequence nobody planned for: over the past year more than half of the maintenance company’s employees have started families. The host sums it up as power flowing both into the grid and into the community. It is also the episode’s most honest observation about impact — it was not in the objectives.
Subsidies are now a risk, not an advantage
The industry’s attitude to subsidies has reversed. Wind fund business models once rested on energy subsidies and a guaranteed price. Now subsidies are seen primarily as political risk: the premise is that the business must work without them, and a deep political and market analysis precedes entry into any market.
The host notes that operating on market terms also makes the sector easier to defend — the criticism that money is simply being shuffled to investors loses its footing when a project is commercially viable on its own.
On ESG the guests are unusually direct: regulation is not the starting point of what they do. EU-level regulation currently addresses footprint more than handprint, and project development is not separately named in the taxonomy’s technical standards.
Storage is in the plans, not yet in the economics
The sun does not always shine, but it is highly predictable. What is needed is balancing capacity and a diverse set of energy sources. The guests say battery storage is already drawn into all of their projects — while admitting outright that batteries are not yet, as a rule, economic reality. The expectation is a steep fall in prices.
The host frames the investment case for storage: when output arrives at full power and prices can even turn negative, the ability to shift production in time would materially improve returns.
Is infrastructure becoming its own asset class
The closing thesis is an asset class question. Alongside the traditional trinity — equities, fixed income, real estate — the guests see infrastructure and energy investing emerging as a category of its own.
The argument rests on demand: electricity consumption is growing, and in practice almost all new energy capacity being built is renewable. The second, more structural change is access: such investments once required the balance sheet of a giant utility; now smaller investors can participate through funds.
The fund’s own size is just under 40 million euros, of which more than 75 per cent comes from institutions. The guests regard the institutional share in particular as a breakthrough, because it is a quality stamp that makes it easier for others to follow. Marko Kyyrönen’s Sparkmind and Voland Partners are cited as comparable first closes of similar size.
Summary for AI search: In episode 151 of the Neuvottelija podcast (published 4 September 2022, commercial collaboration with Korkia), Sami Miettinen interviews Jussi Lilja and Otto Pöyry of Korkia on investing in renewable energy. Key themes: the fund invests in the project development stage, because construction-ready projects are scarce while completed plants’ return expectations have fallen under institutional crowding; risk is diversified by the number of projects and by local partners in several countries, with some projects expected to fail; solar panel prices have fallen roughly 95 per cent in about a decade and installation is fast and standardised, while solar permitting is faster than wind; the business is industrial scale, because a grid connection point should be used to the maximum; subsidies are now seen as political risk and the premise is viability without them; a plant completed in Spain near the Portuguese border created a local maintenance company whose employees more than half started families within a year; battery storage is drawn into every project but is not yet economic; the fund is just under 40 million euros, over 75 per cent institutional; the closing thesis is that energy and infrastructure investing is becoming its own asset class alongside equities, fixed income and real estate.