Here is what you want to know before adding solar power to your portfolio.
AS MORE INDIVIDUALS, businesses, and governments become worried about global climate change due to carbon emissions, there is an increased interest in renewable energy as part of a socially responsible investing portfolio.
Among the most often-cited kinds of alternative energy is solar power.
For people who expect renewable energy to become more popular in the next few years, the notion of solar investing may be appealing. After all, it is widely considered one of the most exciting and viable alternatives to fossil fuels.
What’s Solar Investing?
Solar investing encompasses investments in a variety of facets of the solar energy supply chain. Maybe you invest in companies like First Solar (ticker: FSLR) that produce large-scale solar panels. It may even mean investing in a favorite company like Tesla (TSLA) that expects to make smaller solar products for houses.
In addition, for those more interested in the capital, it is possible to get exposure to solar-related businesses through alternate energy funds and even exchange-traded funds, or ETFs, that concentrate solely on companies involved in the production and supply of solar panels and associated products.
However you do that, however, it is important to comprehend the challenges facing the solar sector. While there’s tons of promise in the future of solar, there are also some drawbacks to take into account.
Below are a few of the solar energy pros and cons an investor must consider as you make your choice.
Pros to Purchasing Solar
The biggest benefit of solar investing is that it is sustainable. Eventually, there’ll be no more oil to drill, natural gas to frack, or coal. The sun, however, still has countless years inside.
Additionally, particularly in America, there are wide swaths of property which have a high proportion of sunlight every year. This is particularly true in the Southwest.
Another expert on solar investing is that there is a relatively low environmental impact when compared with fossil fuels. While anything is going to have some effect, solar-powered electricity offers much lower greenhouse gas emissions than petroleum and coal, and it does not do the same damage to the property that you see with fracking.
Finally, solar investing could cause a level of energy independence. As opposed to relying heavily on certain regions where there are deposits of fossil fuels, it is possible to rely upon your own energy generation with the assistance of the sun. Additionally, the fact that solar panels can be installed in your home may result in a certain level of energy self-reliance from the populace.
It’s a fact that solar energy has been rather expensive in the past, but costs are coming down and enhanced efficiency with solar panels and solar cells is making solar power more practical for more individuals. That reality means that there is potential to buy in today and possibly reap gains later on.
Cons to Purchasing Solar
It is not all sunshine and rainbows, however. Solar investing still includes challenges to overcome.
The biggest issue is how solar power is, by its nature, intermittent. Solar energy is only generated during daylight hours and significant cloud cover may interfere with this. The fantastic thing is that there are attempts to fix this problem with storage. Think about looking to Germany for possible opportunities in solar power storage.
Solving the power storage problem is small potatoes, however, compared to the matter of substances used for solar power production. Lots of the components used in solar technology demand rare earth metals. Extraction may be a problem, but so is demand. Other electronics take advantage of these materials.
In addition, along with concerns about future demand, there’s also the issue of disposal. The very same materials which make electronics disposal a concern also affect solar-related manufacturing.
Until replacements for these materials are found or recycling of different components becomes available, this could continue to be a challenge for solar investing.
Finally, don’t neglect the distance that large solar arrays need. This might interrupt animal habitat or cause other issues. Some suggestions are to place solar panels on big warehouses and buildings, in addition, to follow current electric transmission lines to reduce a few of the impacts on nature.
The fact, however, is that until technology develops and solar panels for mass-energy production get smaller, there are definite land-use difficulties. It is one thing to get solar cells and panels to power a home, but quite another to power an entire city.
Being an investor in solar energy has potential, especially as technology advances and the study focuses on finding solutions to the challenges presented in the solar sector. Though some analysts forecast that solar investing will bear fruit in the long run, others are a bit more skeptical.
There’s the possibility that a resurgence in nuclear energy, due to little modular reactor technology, or the growth of other, renewable, renewable sources may be found.
Carefully consider the consequences of your desire for solar investment, and determine where this sort of sustainable investment might function on your portfolio and help you achieve your objectives.