Should You Have Invested in Solar Companies?

Solar power has surged around the world in the past decade as the cost of solar cells and solar panels has fallen. The US Department of Energy SunShot Initiative aims to see the cost of installed solar drop to $1.00 per kWh by 2020. That’s a 75% reduction from prices in 2010.

Climate scientists warn that reducing carbon emissions alone will not be enough to keep average global temperature rise below 2 degrees Celsius — the target of the Paris climate accords. They must be eliminated entirely, something that cannot happen if nations continue to generate electricity from fossil fuels like coal, oil, and natural gas.

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That means renewables like solar and wind are critical to the fight against climate change. But the world of commerce runs on profits, not ideology. It is one thing to say we need to go green to save the planet but in order to make good on that promise, the green alternatives need to cost less than the alternatives.

The solar power market is composed of two parts — companies that manufacture the solar cells and solar panels and companies that install them. On the installation side of things, there are those who specialize in rooftop systems for residential and commercial customers and those who install large solar power plants for utility companies,

Over the past decade, many new companies have entered all of those fields. Some have thrived and some have fall fallen by the wayside. An example is Solyndra, a start up company on the west coast that planned to manufacture solar panels in the United States.

Solyndra obtained more than $500 million in federal loan guarantees with the promise that it would create more than 1,000 jobs. But competitors in foreign countries — mostly China — were able to undercut Solyndra on price and the company went bankrupt and early investors lost all the money they put into the company.

Installers like SolarCity have had an wild ride, too. Created by two cousins of Elon Musk, SolarCity lived and died on the policies created by the public utilities commissions in each state. At first, rooftop solar was a tiny part of the market.

People with solar panels on their homes were able to sell any excess power they generated back to the local utility company at market rates. That process is known as “net metering.”

But as the number of rooftop systems increased, utility companies began to push back against having to pay for electricity someone else generated. They were accustomed to selling power, not buying it back from private individuals.

For example, SolarCity was thriving in Nevada where abundant sunshine made rooftop solar an attractive proposition.But when the Nevada PUC changed the rules at the urging of local utilities — slashing net metering rates and imposing a monthly fee on rooftop systems — SolarCity ceased doing business in Nevada, putting hundreds of employees out of work.

People who want to invest in solar companies are like those former SolarCity employees. Their investment can look secure one day but disappear the next. To date, investments in solar companies have been far more risky than those in more established sectors. Of course, following the safest course also means average returns are just that — average.

Emerging markets offer opportunities for higher returns but at higher risk. One investment strategy is called a contract for difference or CFD. CMC Markets offers tutorials online about CFD’s and provides a platform for making those and other investments online.

Making money in the market is hard work and requires the proper tools. CMC Markets has a complete assortment of online tools available for individual investors.

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This post is sponsored by CMC Markets; images by StockSnap

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