Green Investments: Can You Make Money From Solar Panels?

by | May 28, 2021 | Blog

A row of green plants and a light bulb symbolising solar energy’s bright future

Summary

While all investments are made with the general goal of making money, green investments are potentially a win for the environment and the future – not to mention your conscience. As the climate crisis represents one of the greatest threats to human life, there is arguably no “greener” investment than renewable energy.

Solar panels play a significant role in the solar power industry. Solar energy is currently the most cost-competitive and easily deployable source of electricity in many countries across the globe. Leading market analysts speculate that public demand for solar power will continue to soar while capital expenditure drops.

If you want to make money from solar panels, it’s essential to do your research (as with any investment). The main opportunities lie in government-backed energy schemes, solar stocks, bonds, and funds. For a more domestic approach, you may even want to install solar panels on your private property.

Introduction

You’ve probably heard the phrase “put your money where your mouth is”, but what about putting your money where your values are?

According to global organisations such as the World Green Economy Council (WGEC), green investments (aka. sustainable or responsible investments) aim to make a positive difference by generating profits and improving the environment. You can think of eco-friendly stocks as an offshoot of the ESG movement – an increasingly popular investment practice that deliberately takes environmental, social, and governmental factors into account. In fact, you may already be applying some of these principles to steward your investment portfolio.

Due to its cost-competitiveness and sustainability, solar energy carries investment potential that many of today’s prospectors are basking in. Once we’ve surveyed the renewable energy market as a whole, we’ll enlighten you about a winning concept: making money from solar panels. Are solar panels worth it from an investment standpoint?

Renewable Energy: The Ultimate Green Investment

While fossil fuel investments experienced great turbulence in 2020, utility-scale renewable power proved to be less volatile.

In many ways, 2020 was a shock to the system – impacting virtually every industry on the planet. A recent report from the International Energy Sector (IES) offers a comprehensive review of the energy market changes triggered by the worldwide COVID-19 pandemic. In the following few paragraphs, we’ll reflect on some observations from this report.

Due to national lockdowns, the stalling of car sales and broader decreases in construction and industrial activities, the entire energy sector has been forced to recalibrate. IES experts suggest that oil and gas investments were hit the hardest in 2020 – with oil spending potentially falling by up to $1 trillion (that’s roughly $1.21 trillion CAD). Some crude oil companies reached the bottom of the barrel and had to pay people to dispose of their oil.

While fossil fuel investments experienced significant turbulence in 2020, utility-scale renewable power proved to be less volatile. According to the IES, large-scale clean energy projects in developed countries were much more stable than fossil fuel projects. Despite general project delays and shifting demands, the IES reiterates that renewable energy is crucial in our transition towards sustainable life on Earth. However, their report also indicates that the energy sector needs to boost clean energy technologies and set more explicit goals. By pushing these initiatives to the foreground, systems have a better chance of coping with increasing global energy needs and the pressing demands of climate change.

It didn’t take long for these hopes to be actioned. At the recent 2021 Virtual Leaders Summit on the Climate, US President Joe Biden and many other international leaders pledged to steer a mass shift away from fossil fuels and towards long-term clean energy technologies. These government-backed statements affirm what many environmental commentators and intelligent investors have prophesied for years: renewable energy is the way of the future.

Top Three Reasons to Invest In Solar Energy

Bird’s eye view of a dazzling solar farm next to a yellow canola field

Of all the major renewable energy sources available right now, solar power is projected to grow the fastest.

Investing in clean energy is not limited to the solar sector, since renewable energy also includes wind and hydropower. However, the global solar energy sector is on track to exceed the value of $400 billion by 2022 (according to leading market analysts at Statista). For the sake of comparison, it’s helpful to observe that specialists at Allied Market Research estimate that the wind market turbine market will be worth $134.6 billion by 2023, while hydropower is expected to reach a value of $541.5 billion CAD by 2027. Of all the major renewable energy sources available right now, solar power is projected to grow the fastest.

Below, we’ve detailed the top three reasons why you should consider investing in solar energy.

  1. Solar energy is cost-competitive
     
    According to investment experts at Wood MacKenzie, solar energy (specifically solar PV) is the cheapest and most easily deployable form of new electricity in sixteen nations and counting – including Canada and the US. Solar power costs have fallen by approximately 90% over the past twenty years and may be set to decline even more over the next few years. These changes are mainly due to decreased manufacturing costs and critical technological developments, such as solar battery storage.
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  3. Solar technology is getting better and better
     
    Understandably, the energy yield of solar PV panels tends to be highest in regions that are naturally rich in sunlight. As the weather changes and light levels fluctuate between day and night, generating energy from the sun is disrupted. While solar energy production tends to reach its peak at midday, public demand for power doesn’t typically surge until the evening. In California, this imbalance is known as the ‘duck curve’. Several technological developments help solar companies to supply renewable power to the grid in a more reliable way:

    • Robust lithium-ion batteries can store surplus solar energy
    • Grids can revert to fossil fuels in moments when solar supplies are low
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  5. Major corporations are pushing solar power
     
    From Apple Inc to the data giants at Switch, more and more companies are making headlines by investing in 100% solar-powered facilities. While domestic-scale solar panels are promising, powerful corporations can have a considerable impact on the solar energy market – whether by financing projects or increasing the demand for large-scale industrial facilities. Moreover, a carbon-neutral status is increasingly coveted in business from both an economic and public relations standpoint. Corporations that maintain eco-friendly practices can also reduce their energy expenses and may even qualify for green tax credits.

Interestingly, solar power companies no longer depend on government subsidies as much as they used to. By promoting solar power in their speeches and campaigns, governments and corporations are essentially providing free advertising for the solar energy industry, as well as renewables as a whole.

Solar Panels: The Stars of the Solar Energy Movement

With no signs of the sun disappearing any time soon, solar panels are a perfect way to harness renewable power.

Solar panels (that is, solar PV panels) convert sunlight into electricity via the photovoltaic (PV) effect. As you may be able to guess, ‘photo’ stands for light, while ‘voltaic’ stands for a voltage or current. According to experts at the UK National Grid Group, solar panels play a vital role in the solar energy movement – even powering the satellites that orbit Earth. Unlike solar thermal panels (which serve a water-heating function), PV panels convert sunlight into sustainable electricity that suits a broad range of purposes.

In a nutshell, solar PV panels are made up of many interconnected ‘cells’ enclosed with metal and glass. Typically, the surface area is covered with a modest layer of silicon which reacts with sunlight particles (photons) to generate a charge. During this process, wires conduct a direct current (DC), and an inverter converts this to an alternating current (AC) that is easier to control on an industrial scale.

From an investment standpoint, there are many different opportunities along the solar panel supply chain. Each stage contributes to the overall effectiveness and profitability of the solar market. For example, the core research and development phase aims to master solar technology and pioneer new solutions. Design and manufacturing processes support solar cells, components, and accessories (such as cables and connectors). This stage often involves the importation and distribution of parts – since the solar market is globalised.

In terms of PV panel assembly, a large installation workforce caters to residential, commercial, and utility-scale projects. You may also be interested in processes that happen after power has been generated – from storage batteries to yield companies that engage with renewable energy assets.

The Massachusetts University of Technology (MIT) suggests that the amount of energy that the sun continuously sends towards Earth (173,000 terawatts) is enough to compensate for the entire world’s energy use 10,000 times over. With no signs of the sun disappearing anytime soon, solar panels are a near-perfect way to harness renewable power. As long as the sun keeps on shining, there will be free energy that we can utilise.

What To Expect From The Solar Energy Market

Infographic showing solar panels on a corporate rooftop and energy ratings

The solar energy market is on a mission to illuminate the present and the future while making a profit.

According to annual technology baseline reports from US National Renewable Energy Laboratory (NREL), the capital expenditures (core running costs) associated with solar technologies are forecast to decrease. As we already know, the practical demand for renewable energy continues to increase. This dynamic suggests that the solar energy industry is on track to become even more lucrative than it is currently. These market predictions apply to residential and commercial sectors, as well as utility-scale projects (i.e. those that sell energy to the electricity grid and generate at least 5 megawatts (MW) of power.

While the forecast may look promising, it’s vital to do your due diligence by researching the solar companies that catch your attention – either by yourself or (preferably) with the help of a professional. Below, we’ve listed a few of the factors you should bear in mind if you intend to make money from solar panels:
 

  1. Upfront development costs are not uncommon for utility-scale projects.
     
    The mass generation of electricity using solar panels is no small feat. As a matter of necessity, it typically involves upfront development costs associated with land acquisition, manufacturing, and mass infrastructure. From the outset, most solar energy companies amass some degree of debt to launch their projects. After installation, solar panel fields begin to reap impressive rewards. However, utility-scale solar panel developments often require considerable attention and advanced expertise before seeing the light of day.Thus, significant upfront costs are relatively standard in the solar panel industry. As we explored earlier, ongoing research breakthroughs are helping manufacturers to develop more efficient solar technologies that can reduce costs. In an ideal world, you should also expect to see some form of revenue coming in from your investments.
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  3. Always investigate the solar energy company’s track record.
     
    The mass production and distribution of solar energy is still a relatively ‘new’ development, making it challenging to predict which projects will stand the test of time. While the general future looks bright, not all companies hold the same value and potential for growth.As a result, it’s wise to investigate the background of your chosen solar energy company, along with any significant accomplishments and milestones. This information gives you a prime opportunity to judge its objective performance and set your expectations accordingly. If the company is new on the scene, you may even wish to research the past achievements of its directors and other key personnel.
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  5. Remember to pay attention to research and development.
     
    Research and development (R&D)> often play a crucial role in economic growth – particularly in ‘new’ sectors developing at the rate of technological progress. While data from the NREL’s baseline report predicts a collective decrease in solar energy capital expenditure, it also suggests that utility-scale solar companies with ‘advanced’ R&D facilities are expected to have a long-term advantage. As the graph illustrates, the core business expenses associated with concentrated research efforts have been forecast to decrease by up to 50% over the next decade. Consequently, R&D is a valid economic factor to consider if you’re looking to make a lucrative investment in solar energy.
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  7. Appreciate the long-term future and vision.
     
    The solar energy market is on a mission to illuminate the present and the future while making a profit. As a result, it is helpful to explore the long-term vision that any given solar energy company maintains. What are its targets, and how does it plan to achieve them? How does its unique definition of “green” influence its business practices – and do these values align with yours?

Key Solar Energy Investment Opportunities

Cash and solar panels fitting together like pieces of a puzzle

It may be best to invest in solar in light of its long term value rather than as a temporary investment.

While the solar energy market is projected to grow enormously in the coming decades, it is not exempt from short term cyclical changes. As a result, it may be best to invest in solar energy in light of its long term value, rather than as a temporary investment. As we prepare to close this article, let’s review some of the main ways you can make money from solar panels.

  • Investing in government solar energy schemes

As we reviewed earlier in this text, many world leaders have championed renewable energy as a fundamental part of their plans to address the climate crisis. While these promises are set to change the course of history, enlarging the capacity of the solar industry will require a great deal of infrastructure, labour, and resources. Many governments have even set deadlines for these energy goals. With solar income funds, you can ‘back’ these current or upcoming projects with your own finances. It’s a way to advance the solar power industry, while also making a profit from future energy yields.

  • Buying solar stocks and mini-bonds

Buying renewable energy stocks in a solar company is one of the most straightforward ways to invest in the solar panel market. You can find many publicly traded energy companies on the stock market. If you’re familiar with the stock exchange, or simply looking to generate passive income, this may be your ideal ticket to making money from solar energy. You can buy shares in solar panel companies, battery storage stocks, and a wide range of other enterprises in the solar industry.

As you may already know, mini-bonds are a high-risk, high-reward style of investment. This process involves loaning an upfront sum of money to a company that pledges to repay you in instalments (with interest). Rather than investing in an entire company, mini energy bonds allow you to hone in on a company’s specific solar energy division. As their solar assets grow, you’ll reap the rewards of your investment.

  • Exploring renewable energy funds

You can think of renewable mutual funds as a team effort. With this style of investing, your funds are pooled together with contributions from other investors. An experienced financial advisor is tasked with assessing the risks and the rewards associated with different investment opportunities on your behalf. Ideally, this individual should have knowledge and expertise in all profitable areas of the renewable energy market- including solar power. Once your shared financial advisor has decided, they will use the collective ‘pool’ of money to invest in a variety of stocks, bonds, and funds as they see fit.

  • Installing solar panels on your private property

If you’re inspired to bring the solar energy movement closer to home, you can install solar panels on your roof, or even in your garden. This process requires some upfront costs, but there may be government grants available to assist with the fees (depending on where you live).

Final Thoughts

It’s official: renewable energy is on the rise. Advanced solar energy technologies are now equipped to generate and store electricity from the sun. Here, PV panels are paving the way with their efficiency, long lifespan, and versatility. Market analysts have predicted that nearly one-third of the energy we use in 2024 will come from renewable sources – with solar energy set to provide 60% of the overall power in this category. Since many solar projects are launched with mammoth government-backed goals in mind, this type of sustainable energy is likely to endure long into the foreseeable future.

As far as solar power is concerned, the forecast looks sunny.

Frequently Asked Questions (FAQs)

What are the advantages of solar energy?

Since generating solar energy does not require combustion, solar panels don’t release CO2 or other harmful fumes into the atmosphere once they have been installed. While the manufacturing and assembly of solar panels does release some emissions, their overall environmental impact is far milder than burning fossil fuels. Scientists expect the sun to remain present for billions of years – making sunlight a renewable, clean, and accessible energy source.

 

Are there any disadvantages to solar panels?

There are two main challenges associated with solar panels. The first disadvantage is that energy yield varies according to daylight hours and changing weather patterns. Thankfully, advanced solar battery storage technologies help offset these fluctuations and make it possible for utility-scale solar companies to deliver consistent power supplies to the grid. The second disadvantage is that solar farms currently require large amounts of land. All things considered, solar panels are a sustainable and environmentally-friendly alternative to destructive fossil fuels.

 

Are solar panels worth it from an investment standpoint?

Green investments are a savvy way to support cause-driven enterprises, generate profits, and simply help the planet. Since the solar energy market is projected to proliferate and renewable energy demands continue to rise, investing in solar has the potential to be highly lucrative. There are plenty of reasons to give solar investments the green light.

 

How reliable are the market forecasts associated with the solar energy market?

As COVID-19 has recently reminded us, market forecasts aren’t always guaranteed to become a reality. However, well-researched predictions from reputable sources and global agencies may help to set your expectations as a potential investor – especially when there are some substantial overlaps in reports. It’s also worth remembering that international governments representing multiple billions of dollars have already given renewable energy their vote of confidence.

 

Do I need a lot of money to invest in solar energy?

Some solar energy opportunities may welcome investments under $200 CAD, while others may require contributions of five figures or more. The amount of money required to invest in solar energy varies according to the parameters set by different projects. By law, companies must share these details with prospective investors, and the most straightforward way to find out for yourself is by reviewing the IM (investment memorandum).