The road towards renewable energy seems to only be increasing. In fact, according to the global annual investment energy report, 2020 finished off with a whopping $359 billion total worldwide investment in the renewable power sector. With countries implementing climate policies, recovery strategies, and cost reductions brought about by improvements in technology, this number is forecasted to go up this year.
If you are thinking about a promising investment with a cause, then making money from renewable energy sources might be worth your time. One of the renewable sources that you can look at is solar energy. People have relied on the sun and its energy to grow crops for food, dry food, and most importantly stay warm. However, with the increase of technology, we are now able to harness the power of the sun to generate our own power.
As of 2020, solar energy accounts for 2.3% of electricity generation in the US. A small percentage is growing year on year, which makes it a worthwhile investment for the future. If you’re wondering how to be part of this growing industry, read on to know more. In this article, we’ll share with you the ways on how to invest in solar energy.
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1. Solar Panels
One of the primary ways you can invest in solar energy is by experiencing it first-hand through a solar panel installation on your roof. Whether you’d like to switch to clean energy for your everyday electricity usage or are trying to save money, solar power systems are popular alternatives to fossil fuel-driven electricity. After all, what is much better than taking advantage of nature’s most powerful resource – the sun.
What are Solar Panels, and how does it work?
While you may see solar panels as big, flat, rectangular objects lying there on someone’s roof, kind of like soaking in the sun, there’s actually a whole process in turning that sunlight into the energy that can power up homes and commercial spaces. This process, where photovoltaic cells in solar panels collect and convert photons into electricity, is called the Photovoltaic Effect. While one solar panel may not produce so much electricity, multiple sets of panels can easily cover day to day requirements.
When we think of solar panels, we instantly picture a typical residential home trying to cut up electricity costs or an off-the-grid house whose location may be far from the primary grid. However, research shows that in the US, there is a steady climb in solar panel usage in industries from 2011 to 2020.
Investing in Solar Panels: Pros and Cons
Reduces Your Carbon Footprint
We all know that most of our electricity today is produced from burning non-renewable energies such as fossil fuels, which may eventually run out of stock. The process and the source of doing this are unsustainable and unhealthy to the environment. Since electricity is a massive chunk of our everyday life, it’s no secret to know that we are impaired without it.
Using solar panels, you are doing your part in encouraging the generation of clean and emission-free electricity and reducing your carbon footprint in the world. In addition, out-of-service solar panels can have their parts recycled or sold, so not much gets put in an already growing landfill. In a philanthropic way, you contribute to a more significant cause, even larger than your individual gains.
Returns on investment
Choosing to have solar panels installed in your home or office comes with a cost. However, the real question is if that cost is worth it and would bring you your money back. Solar panels have a lifespan of 20+ years, so that already speaks for itself in terms of ROI. In addition, some outlive this duration and even last up until 40 years with a moderate efficiency drop. When your panels become out-of-service, they may already be as old as your kids or live up to your retirement years. It’s a purchase of a lifetime.
Save on electricity usage
Depending on sunshine hours and your energy consumption, solar power can run your home all year round. This is not just limited to residential spaces. In a 2018 Deloitte study, businesses that used renewable resources as alternatives, including solar power, reported a 30% reduction in electricity usage. As your electricity needs will be covered by the energy that your solar panels have generated, you will expect to see less in your monthly dues.
There are two types of solar panel applications that improve the lives of millions of people. First, solar panels can be used literally anywhere as long as there is the sun. You can have it whether you live in the middle of a bustling city or in a remote region away from the grid line. Secondly, it’s not just used for powering homes and commercial spaces. Solar panels are also used for water distillation for places with limited access to clean water and can be integrated into building materials like solar energy windows.
It’s not 100% green
While it is marketed as clean energy, the process of making solar panels is not precisely as environmentally friendly as you think. Production of these panels enables emissions of greenhouse gases from the toxic substances used to make one, such as nitrogen trifluoride or sulfur hexafluoride.
You’ll need lots of solar panels
As mentioned, one panel alone can only generate a small amount of electricity, so you’ll need lots more to have a fully functioning solar system. In addition, some appliances such as your oven or air-conditioning unit have high-current demands that you can’t rely on your solar power. This means that you may still need to connect to a central grid.
Purchase and installation costs
Unlike a traditional line where it’s mostly tied to a home, solar panels are separate entities. You’ll need to have it attached to your building, and that will entail costs on installation and labor, not to mention the money you spent on buying it. And since you’ll need a handful of solar panels to produce enough electricity, the cost adds up. For an average-sized home, at least a 5 kW to 6 kW solar panel system can cost $9,255 and $28,000. Bear in mind; however, that solar panel’s costs are dropping each year as more and more institutions are finding ways to make purchasing cheaper for everyone. In addition, various Governments also offer rebate schemes and tax credits when you install solar photovoltaics.
If you think that solar panels are the way to go for you, you made the right choice. Before you jump, however, take a good look at your home energy use, your roof structure, and the amount of sunshine your area gets in a day or in a year. You may also need to consider a storage system like a battery. Batteries help with energy storage, and allow you to use the power at a time that suites you. However, batteries can be fairly expensive to buy and setup.
When is your energy use at the highest? Is it during winter when you need to heat your house? Heating is a massive consumer of power, and usually when its winter, there is not so much sun.
These are essential considerations when deciding on using solar panels. Best of all, contact a reliable solar panel store or installation company where a professional can help you make a proper and safe installation.
2. Buying Solar Energy Stocks
With a global investment amounting to $141 billion, we can say that solar energy is one of the most heavily funded renewable resources. China, the United States, and Europe are the leaders on this on a global scale. The United States alone made up 15% of solar consumption worldwide last 2019. With these numbers alone, you can say that the business of solar energy is lucrative.
If you believe in solar and like to support the companies that make it happen, you may think of buying shares in solar companies. Not only will you help these companies in furthering their efforts into solar energy, but you also get to become a part-owner of the lines of products and services. These services may include manufacturing, installation of solar panels, or operating solar facilities.
Here are some ways on how you can buy shares from solar companies:
Buying directly through individual stocks from these globally-recognized solar power companies such as:
- Iberdrola SA (IBDRY)
- JinkoSolar Holding Co. Ltd. (JKS)
- Brookfield Renewable Partners LP (BEP)
- First Solar Inc. (FSLR)
- Canadian Solar Inc. (CSIQ)
- SunPower Corp. (SPWR)
Buying directly through Solar/Alternative Energy ETFs (Exchange-Traded Fund):
Buying directly through Alternative Energy Mutual Funds with solar energy companies in their portfolio
- Renewable Energy Industrial Index (RENIXX)
- Calvert Global Energy Solutions Class A (CGAEX)
- The Firsthand Alternative Energy Fund (ALTEX)
Buying Solar Energy Stocks: Pros and Cons
Creation of Jobs
A growing sector of any industry leads to expansion and growth. When businesses are growing, more labor is needed to keep up with the demands. With this positive trend seen in the solar energy market, we can also see more jobs opening.
Investing for a better tomorrow
A business is a business, but a business with a mission for cleaner energy is worth more than the money. Having a part in this mission of research and technological development allows you to help.
It may not be a sure ball when it comes to investing, but if you heed in with knowledge and your own appetite risk, the rewards may be in bounty. Given the positive reviews and forecasts about the solar power market, it may be an excellent time to dip your toes into it.
Not a reliable source of income
The solar power market, like any other market, is fluctuating. The frequent highs and lows may have you jumping in extra one day and keeping calm while you see the line dip further on another day.
Limited sun exposure for some areas
While the sun powers life on Earth, in some places, there is less of it. There are still drawbacks in the solar power business, such as the intermittent nature of solar energy and its reliability in daylight.
It’s not totally environmentally friendly
The process alone of making solar panels involves the use of harmful substances that emit greenhouse gases. In addition, building solar power plants means taking up space for buildings. This sometimes leads to the rehabilitation of wildlife or native species to give way to the infrastructure.
As with any investing venture, know your risk appetite first. While you may be passionate about what you believe in, don’t forget to do thorough research about the companies you’d like to invest your money in. Better yet, contact a professional or a broker to guide you in your investing decisions. Remember, you invest to gain, not to lose.
3. Investing directly through alternative platforms
If you want to put your money into a good cause but want to have an active impact on the solar power space, then you might take a look at investing directly on alternative platforms. These are not your big corporations but projects that create green ideas and connect more closely with their audience. Unlike the other types of investing mentioned above, investing in green alternate platforms requires an extra layer of due diligence.
Here is a list of alternative platforms you might want to check:
The company is primarily a solar leasing platform. First, it identifies places that need solar installation and crowdfunds potential lessors who are willing to buy solar panels and have them leased to the identified place or institution. How do you get paid? You each get a quotation of how much electricity a single panel can produce and your corresponding potential earning. The company runs along with the statement, “Monetize Sunshine” If you like to own a solar panel and get your money back, then The Sun Exchange might be just what you’re looking for. Read our in-depth review of The Sun Exchange to find our more.
Blockchain is the buzzword nowadays: Bitcoin, Ethereum, and the rest of the crypto space. Power Ledger banks on this technology to create a peer-to-peer energy trading platform. If you have excess power from your solar panels, you can directly trade them through here. How is it done? A system tracks your energy consumption and hosts energy trades. You’ll be given registration details to the Power Ledger system. Once logged in, you can see both your electricity usage and P2O trading transactions. Now, that’s cool solar!
Citizen energy is a crowdfunding platform that focuses on helping sustainable energy projects get funding. The organization itself gets lending help from the European Union funding. Although their projects are not solely focused on solar, most initiatives are for combating climate change and clean energy.
Proposals for sustainable projects often get tossed out in the trash, often thought to be non-profitable in the long run. Green banks take out this discrimination and invest primarily in projects that combat climate change. With that said, it may not be solely limited to rooftop solar or other solar energy projects but to an entire spectrum of clean energy. With over 20 banks worldwide by 2020, green banking is here to stay.
Investing through Sustainable Alternative Platforms: Pros and Cons
Unlike buying shares in solar companies, alternative platforms let you first-hand participate in the projects and the business. You have more control of your investment. We’re not just talking about money, but also time and flexibility. At most times, there is no middleman, so there are fewer costs and fees to make up for in the service. However, since most projects in alternative platforms are either start-ups or privately-help, there is still a risk of not flying by. As always, take a good look at your risk appetite to make a sound decision.
Should you invest in solar energy?
The future certainly is green. With the help of available and upcoming technological advances, we can continue creating a call-to-action cleaner energy use. With solar energy, we can raise the values of our homes and our lives while reducing our carbon footprint for a better tomorrow.