How to Invest in Solar

Investing comes with risk. This article is a general discussion of the merits and risks associated with these investments, not a specific recommendation. Speak to an investment professional and make sure your portfolio is diversified. Tim Nash owns a SolarShare bond. Tim does not own any other investment mentioned in this article.

The solar industry has been getting lots of positive news lately. An election in India has brought in a new government with the ambitious vision of deploying enough solar energy to ensure at least one lightbulb in every home by 2019. At the same time, the Chinese government is taking a hard turn towards renewables as air pollution chokes their cities and population. The new plan will triple their solar capacity to 70 gigawatts by 2017.

The deployment of renewable energy has been hampered by lobbying and petty politics here in North America, giving concern to investors who normally lead to the political right and are dismissive to environmental concerns. Fortunately, the rest of the world seems to be moving at warp speed. Germany and South Korea have been leading the way for years, with more recent support coming from Japan and South Africa.

Are Wall Street investors behind the times with a negative bias for anything green? If so, the solar industry could be heavily undervalued as many analysts are starting to suggest. The sector as a whole has performed dismally over since before the 2008 crash. Solar indexes fell an average of -23% to -27%. Clearly, this sector is not for the faint of heart. But if you strongly believe in a solar future, now might be a good time to buy. Here are your options:

For passive index investors, there are two solar ETFs: Guggenheim Solar ETF (TAN) & MarketVectors Solar Energy ETF (KWT). The vary slightly, but both offer comprehensive exposure to the solar sector.

Since both ETFs include many small (and very volatile) companies that have yet to turn a profit, it might be smarter to simply invest in First Solar (FSLR), the sector leader. Their CEO recently appeared on Mad Money, and presented a strong pipeline of solar projects in the works.

If you really want to avoid the volatility of the market, you can explore local options to invest in community-owned solar projects that provide a much more stable cashflow. American investors can look to Mosaic to find worthwhile solar projects that are crowdfunding investments, while UK investors can visit Trillion Fund to access a similar model. Investors here in Ontario would be wise to look at some amazing renewable energy cooperatives that have sprung up in recent years like SolarShare, Ottawa Renewable Energy Co-op, and Wintergreen Renewable Energy Co-op (in Kingston) to purchase solar bonds.


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