Solar Investment Opportunities
Cheaper than Natural Gas
It was back in late 2004 when I told investors the solar industry was about to embark on a serious growth trajectory...
It was that prediction that put me on the map, as it allowed us to make an absolute fortune from the solar rush than ran between 2005 and 2008. During that time, it was not uncommon to walk away with a triple-digit gain from nearly any stock that had the name “solar” in it.
Those days are long gone. And today I won't touch 99% of the solar stocks out there — but not because the solar industry isn't continuing to grow by leaps and bounds...
Truth is the solar space consistently boasts dramatic growth, year after year.
That much hasn't changed — especially now that solar leasing companies are taking the prohibitive pricing out of the equation.
The reason most solar stocks are struggling today is because the industry as a whole is now in maturation mode...
And as a result, we're witnessing the absolute gutting of the laggards and the consolidation of the market.
To be honest, I don't think there will be more than a half dozen serious solar players by the end of this decade. Most of these will not be pure solar plays.
Today, when it comes to solar, we spend a lot of time on the sidelines watching the whole thing unfold from a safe distance... patiently waiting for a bottom so we can scoop up what will ultimately be some of the best bargains the market will ever offer.
That being said, the solar industry isn't completely devoid of opportunity.
While panel and cell manufacturers are barely treading water these days, installers, engineering firms, and tech plays are cleaning up.
Here are two that can make you a ton of cash...
Lease These Profits
I was having drinks at a hotel bar with a sales rep from a solar company in 2006 when I first heard about a new “solar leasing” model.
I knew within minutes this would be a major game-changer.
You see, solar has historically been a cost-prohibitive alternative for a lot of folks. The high up-front costs have just been too much for the average homeowner to take on.
But with a leasing model, a homeowner can lease a system with little or no money down, and cut his electric bill while allowing the sun to produce his electrons.
The leasing company takes care of pretty much everything: It covers the materials, panels, the installation, the inverters, the insurance, even cleaning and maintenance.
It was in the commercial space that leasing really began, but it quickly moved into the residential space.
Today the three biggest companies in this leasing market — SunRun, SolarCity, and Sungevity — are insanely busy installing thousands of new solar power systems across the United States.
In fact, last year solar leasing accounted for about 60% of residential installations in California — the hottest solar market in the U.S.
Many of these companies are rapidly expanding into new markets such as Arizona, Colorado, Hawaii, Maryland, Massachusetts, New Jersey, New York, Oregon, and Pennsylvania.
Now, earlier this year we learned that solar installer and leasing firm SolarCity is planning an IPO. If successful, it could value the company at $1.5 billion.
To give you a brief history, SolarCity began operations in 2006. Today it boasts about 15% of the U.S. installation market.
SolarCity is the company that was tapped by the U.S. military to construct the largest rooftop solar project in the country, which will ultimately create more than $1 billion in solar projects across 33 states.
Interestingly, after a DOE loan never materialized for that project, the company quickly lined up $1.28 billion in private financing (this after Google threw down $280 million to get a piece of this action).
The IPO is scheduled for this year, but it's been pretty quiet.
In any event, we're keeping a close eye on it. If it's priced right, we'll definitely jump on...
Because make no mistake about it; the solar installation business is booming.
Cheaper than Natural Gas
Bloomberg ran a piece last week on a robotics company that was developing tracking systems that could potentially cut the cost of solar by as much as 20%.
And according to the company's CEO, using this technology, solar project owners could generate as much as 40% more energy than conventional solar power systems.
The article was interesting, and the company seems to have turned enough heads to land it $7.5 million.
I'm not sure what the future holds for this little robotics firm, but I can tell you that the benefits these guys are talking about simply aren't meaningful enough to be a real game-changer...
In the solar space, that's what it all boils down to.
This is why we're so bullish on a new technology that cuts the cost of solar in half and doubles power output.
The company behind this one has recently released a new set of lab results that show, without a shadow of a doubt, that this technology can actually bring the cost of solar down to the point where it's competitive with the lowest-cost fossil fuels... even natural gas!
This is what I'm talking about when I say 'game-changer.'
The best thing about this one is it's not in competition with solar companies.
Instead, it simply licenses its own patented technology that allows solar companies to slash prices while increasing power.
It's the kind of thing that has solar installers like SolarCity foaming at the mouth...
And it's the kind of technology that's turning this little tech firm into the most lucrative backdoor solar play on the market.
My colleague Nick Hodge has been on the inside of this one for a long time now, and he's pretty much become the “go-to” analyst on this company (and more importantly, its technology). Nick's original white paper can be found here.
Although there are few opportunities in the solar space right now, the ones that do exist are potential blockbusters. And because solar gets no love on Wall Street right now, these gains are easy pickings.
So get in now while the gettin's good!
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the managing editor of Energy and Capital and contributing analyst for the Energy Investor, an independent investment research service focusing primarily on stocks in the oil & gas, modern energy and infrastructure markets. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor''s page.