Renewable energy used to be the optimist’s dream. Sure, the idea was nice, but no one thought that we’d ever be able to make renewable energy affordable enough to work on a large scale… But in the past few years, all of that has changed.
Just a hundred years ago there were practically no sources of renewable energy, other than a tiny amount of energy gained from hydroelectric power. If you told people in 1908 that coal would provide less than 20% of our energy in 2015, they would have laughed in your face. A world that was not reliant on coal, and as time went on, oil and natural gas, would have seemed an impossibility.
But it’s becoming our reality.
Now, even in 2017, we’re not running without fossil fuels; gas and oil are still vitally important to our society… but they might not remain that way. In the next hundred years, oil and gas might go the way of coal.
Solar power is the most readily available natural source of energy, but there’s always been a money problem. Renewables used to be prohibitively expensive for companies, and virtually impossible for individual residences, but in the past 10 years, everything has changed.
A Dramatic Price Drop
The average cost of the PV panel needed for solar installations has more than halved since 2004, and this has caused solar installations to spike. According to nasdaq.com, “The U.S. installed more solar than natural gas capacity last year, its first in history. According to a current report by GTM Research, U.S. solar installations grew 17% in 2015 to 7,286 megawatts (MW), marking the 15th consecutive annual record. Per the Solar Energy Association, in the next two years, approximately 20,000 MWs of new solar capacity will be installed, about twice the existing capacity.”
There are other factors to consider when it comes to solar power as well. The Paris climate accord in December of 2015 had 195 countries come together to agree to limit fossil fuel use and try to move toward a more environmentally friendly energy future. The United States has specifically put certain energy restrictions in place. According to the Wall Street Journal, “Utilities are often willing to pay higher prices for wind and solar power because they need the electricity to comply with state rules. The Obama administration also introduced rules last year that require power plants to cut carbon dioxide emissions by 32% from 2005 levels by 2030.”
So there’s pressure from the government, but there’s also demand for renewables due to their environmental friendliness and their lowering cost. According to National Geographic, “Despite low natural gas prices, solar and wind accounted for 60 percent of new U.S. power capacity last year and will likely account for 70 percent this year.”
That’s because it is cheaper. There are also government incentives to consider; Congress renewed tax credits on solar and wind power for another five years in 2015, which forces companies to look into renewable energy sources more seriously, as it can help cut costs.
According to SEIA.com, “Growing 43 percent year over year, the U.S. saw 2,051 megawatts (MW) of solar photovoltaic (PV) installed in the second quarter of 2016. According to GTM Research and the Solar Energy Industries Association’s (SEIA) latest U.S. Solar Market Insight report, this marks the eleventh consecutive quarter in which more than a gigawatt (GW) of PV was installed.”
As of last year, solar will cost less than either coal or natural gas over 30 years.
Big names are getting interested in solar power as well... You've heard of Elon Musk, right? The billionaire CEO seems to have his fingers in every pie, from the colonization of Mars, to electric vehicles, to solar.
Tesla recently introduced a solar roof that has aesthetic appeal and is less expensive than a typical solar roof. It's just $42 per square foot, a full $26 cheaper than Bloomberg New Energy Finance's original estimates. The lower costs and nicer looks should certainly go a long way to opening up solar power for even bigger audiences, and it's no surprise that Tesla found a nice-looking and cheaper way to spread solar to the people.
After President Trump was elected in 2016, solar stocks were quickly sold off because of the president's plan to increase oil and coal use, but it looks like solar is finally picking up again, as investors realize that solar power is inevitable.
First Solar, Inc. (NASDAQ GS: FSLR)
First Solar is a solar energy company that works in the U.S. and internationally. It's a big solar energy company, with a market cap of $4.623 billion. First Solar designs, manufactures, and sells solar panels and solar equipment, and it also provides operating and maintenance help to utilities and commercial companies. It's a solid solar stock with a large client base in the U.S. and abroad. It was founded in 1999 and is headquartered in Tempe, Arizona.
SunPower Corporation (NASDAQ GS: SPWR)
SunPower is a much smaller company than First Solar with a market cap of just $1.56 billion, and a share price of $11.17 at the time of writing. However, this is one of the reasons we recommend SunPower. It’s a much more feasible stock to get invested in for the average investor, and SunPower has a lot of room for growth, specifically because it provides solar technology for more than just commercial use, it also provides it to individuals and residences. With the growing demand for solar power in homes, SunPower has an advantage over bigger companies like First Solar because it is already set up to provide solar power to individual homes. It was incorporated in 1985 and is headquartered in San Jose, California.
SolarEdge Technologies, Inc. (NASDAQ GS: SEDG)
SEDG is a tech company that provides one thing all solar power needs… PV panels. Without these panels, solar technology doesn’t work, and so SEDG’s focus in designing, manufacturing, and selling these needed parts has made its stock jump lately. It sells its products for both commercial and residential use, so it has a wide revenue base. It's headquartered in Israel, but sells its products all over the world, including Europe and the U.S. It's a bit smaller than First Solar and SunPower, with a market cap of $942.24 million, but its stock is valued highly and is currently priced at $22.67.
You can also get invested in the German Guggenheim Solar ETF. (NYSE: TAN). It's got investments in SunPower and Canadian Solar (NASDAQ: SPWR) and many of its top holdings are in North American solar companies. If you're looking for a broader solar investment, that's a bit more solid than individual companies, this ETF is a good place to start, because of its investments in many different solar companies across the world. With it, you'll have less of a chance of a serious dip if any individual companies start having problems.
The landscape of energy is dramatically different now than it was in 1917, and you can bet that in the next hundred years we’ll continue to see the focus of energy move from fossil fuels to renewables: our grandchildren might not remember a time where windmills didn't fill every landscape and homes weren't all powered by solar energy.
If you are interested in solar investing, you may also enjoy these related resources from Energy and Capital:
You can also view the latest presentation on the future of solar energy by the experts here at Energy & Capital. The video presentation can be viewed right here.
If you don't have time to view the 45 minute video presentation, then you can view the written report right here, where you can browse and skim at your own leasure.
Don't take too long though, this lucrative opportunity won't be this affordable much longer.