Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.
Thoughts On Solar
After a cloudy, several decade long malaise, the sun is finally shining on solar energy (pun intended). Since the 70s, solar energy was a do-it-yourselfer backyard dream of unplugging from the monthly electric bill. It wasn’t cheap. It wasn’t efficient. But all that is changing.
The biggest deterrent to solar energy has always been cost. That cost has fallen to a point where in some parts of the country, using solar over other fuel sources is an easy choice. We’re at point now where huge solar projects are being brought online, proving the possibilities, while driving costs down in the process.
Like any new young technology, things become more cost-effective as production ramps up. Government subsidies were the catalyst needed to build out a production base. More efficient technology is the byproduct of that production growth as more revenue is siphoned into research. In the next decade we’ll reach a point where the cost and efficiency of solar starts to make sense in most of the country.
How do you profit from this? I’m sure the first thought is to start a new backyard project. The idea of your own mini solar farm will keep you busy on the weekends for a while. If you live in the right state, you could even sell the excess power to your utility company for a profit.
It could be a few decades before most Americans jump on the solar rooftop bandwagon. That’s not to say there’s no opportunity. It most likely coincides with bigger solar projects being built in the near term.
That leaves us with two areas: the companies behind the ever improving solar technology or those providing the equipment needed to build and support these projects.
The solar panel manufacturers is one area that’s full of competition and shrinking margins. Typically, the low-cost leader is the place to start, but production costs are falling so fast, there’s no guarantee the leader today, will still be leading a few years from now or even next quarter.
That leaves us with the equipment makers for these large projects, which is an area I don’t know enough about yet.
Lastly, solar has had a huge run since it bottomed in 2012. The catalyst for the fall – lack of subsidies driving revenues. The sector has been on a tear ever since. That doesn’t negate the fact this industry is still dependent on subsidies. Until solar is cost competitive with other fossil fuels, these stocks will rise and fall on available government funds.
The Guggenheim Solar ETF (TAN) is the last option or use it as a petri dish for stock ideas in this long-term growth sector.
Last Call
- The Best Investment Strategy? Getting Out of Our Own Way
- Things You Can Do That Wall Street Can’t
- How To Be An Index Investor
- No, Market Highs Are Not a Bad Sign
- 2013 Berkshire Hathaway Shareholder Letter
