Stifel has raised concerns about the potential volatility of dividends from renewable infrastructure investment trusts as key subsidies for clean energy are set to expire in the next few years. Many of these projects rely on government-backed Contracts for Difference, which provide a stable revenue stream, but these contracts will begin to expire between 2032 and 2035.

These subsidies are vital for maintaining a consistent income, which typically supports around 60% of a fund's dividends. Analysts Iain Scouller and William Crighton from Stifel warn that the transition from guaranteed subsidy revenues to more unpredictable market revenues will heighten the sector's risk profile, particularly due to fluctuating power prices.

While renewable trusts often highlight the 'average asset life' of their portfolios, they tend to overlook the expiration dates of subsidies. Some trusts, like The Renewable Infrastructure Group, do provide this information, indicating that the average remaining subsidy life is about nine years. Octopus Renewables has also offered a detailed breakdown of its revenue forecasts.

Scouller and Crighton suggest that boards may resort to paying dividends from capital if necessary, emphasizing the importance of dividends in the sector. This could lead to a gradual sell-off of assets to maintain dividend payouts, potentially diminishing the underlying value of the trusts.

There is ongoing discussion about introducing new subsidy or price guarantee mechanisms, with consultations underway to assess whether older projects could qualify for additional subsidies after their current ones expire.

The performance of renewable energy trusts has been declining, with a 9.3% drop in stock prices over the past year and a 3.4% decrease over the last five years, according to the Association of Investment Companies. Additionally, these trusts are trading at a significant 33.2% discount to their underlying assets, reflecting investor skepticism regarding their valuations.

Among the 19 renewable infrastructure trusts available, only Harmony Energy Income is trading above a 28% discount, primarily due to its ongoing acquisition by a private equity group.

In summary, the renewable infrastructure investment sector faces challenges as key subsidies approach expiration, potentially leading to increased dividend volatility and asset devaluation. Investors are advised to remain cautious as the market navigates these changes.