Using solar power as an investment vehicle
- Business of Solar
Solar power offers many different benefits for almost everyone, from lowered energy costs to a reduction in a carbon footprint. In addition to these advantages to using solar, this energy source also works as a great investment vehicle. For many individuals, companies and groups that opt to go solar, a significant return on investment can be gained by using this clean, renewable energy source.
There are several ways to take advantage of the investment opportunities created with solar power.
Sunlight is free and readily available
The sun has been around for roughly 4 billion years and it will not be going anywhere for another 5 billion years or so. Needless to say, our sun will be around for a long, long time. Plus, best of all, unlike coal and gas, sunlight is absolutely free. Its fossil-fuel counterparts are typically owned by an outside party or company that charges a premium for the products, and these limited resources may eventually be depleted. Further, as people and energy companies consume more fossil fuels, the decreasing supply will continue to drive up the price of these raw materials.
Solar power, on the other hand, does not suffer from the same restrictions as traditional fossil fuels. No matter how much sunlight an array captures, it doesn't diminish the amount that anyone else can use. Without any need to purchase raw materials like coal or natural gas, it means once a solar panel or array has been installed, it will continue to generate clean, renewable energy for the rest of its life - typically between 25 and 30 years.
Indirect investment possibilities
Like any investment option, there are different types of risks and rewards with each potential choice. And, like other types of investments, such as real estate or venture capital, the greater the potential risks, the higher the long-term payout. As noted by GreenTechMedia, solar power offers many different potential investment opportunities with a range of risks and payoffs.
The least risky choice with the lowest returns is by investing directly in a solar energy project, provided there is a contract in place. Due to the reliability and durability of solar power installations, these projects have very low risks, making them a rather safe investment. In addition, crowdsourcing a piece of a real solar project or purchasing renewable energy bonds from a trusted company offers another viable route for a low-risk venture into solar power investing. These projects should provide some sort of financial incentive as well, either in the form of selling the power or through net-metering the electricity.
Slightly stepping up the risk ladder would be investing in stocks. However, there are different types of stock to invest in. For higher returns at an even riskier level, another option is investing in a typical stock traded in one of the main market indices, such as the Nasdaq composite or the Standard & Poor's 500. While investing in the stock market might seem like something only available to upper class or high net worth individuals, there are plenty of ways for people with moderate incomes to make a splash in publicly traded equities.
There are three primary routes one can take when deciding to invest in stocks, each with a correspondingly higher level of risk and greater potential for returns associated with it:
- An exchange-traded fund, or ETF, composed of a basket of potentially dozens of individual stocks, which helps maintain an average price
- Stock in a company with a diversified product offering that also has large exposure to renewable energy projects, like General Electric or General Motors
- Stock from a Tier-1 and highly bankable solar power company like Trina Solar
In addition to indirectly funding solar power projects and purchasing shares in a solar company, another route with the most risk but the best chance of higher returns is to invest in a personal solar PV energy project. Although, as the source noted, a saleable asset in the solar field can run as high as $50,000 for the initial investment in a 1- to 3-megawatt system. However, once the system is up and running, you can then sell the asset for a profit.
Boosting home values
"Solar panels can boost the value on a person's biggest investment: their home."
In addition to using solar energy crowdsourcing or stocks as an investment tool, solar panels can also boost the value of a home. For many Americans, their home is their primary investment. Many families opt to undergo room renovations or other types of remodeling efforts to improve the value of their house, with many even going so far as to build additional rooms or another story. In addition to these viable routes, many experts also agree: Solar panels add value to a home if you own the system.
According to a study of the sales data for nearly 23,000 homes in eight states between 2002 and 2013 conducted by the Lawrence Berkeley National Laboratory in California, homebuyers across a range of regions are consistently willing to pay a higher price for homes or property outfitted with solar PV systems. So not only will solar panels provide a cheap source of power for decades, but they can also boost the value on a person's biggest investment: their home.
Looking ahead to retirement
Individuals and families looking ahead toward retirement know they need to ensure they have as many sources of income as possible for this stage of their life.
Further, solar manufacturers are increasingly becoming more stable and profitable. Purchasing stocks in a bankable solar company can be a great way to not only contribute to growing this sector, but it can also be a smart financial move to include solar stocks in a diversified portfolio. Unlike oil companies, which have seen their fortunes take a sharp downturn in recent years, the solar industry continues to expand and experts only anticipate this growth to remain.
One of the best options for retirement is to purchase a residential solar system. While this will require an upfront down payment, it will eventually pay for itself in the long-run, reducing and potentially eliminating an electricity bill.
Picking the right investment
With such a wide variety of investment vehicles to choose from, in addition to a diverse range of companies to invest in, individuals looking to use solar power should make sure they choose the right companies and products to put their money into.
Trina Solar has the financial strength to compete in the solar PV market for years to come.
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