What You Need to Know About Investing in Solar Energy


What You Need to Know About Investing in Solar Energy

Now, with investors having access to pretty much every industry there is to invest in, renewable energy has become a popular investment among people who are looking to improve the eco-friendliness of our country.

The accessibility that is given is incredible and investing in solar energy is easier than ever. However, although the generation of electricity has improved steadily over the years, according to Statista, from only 244-gigawatt hours in 2011 to 13,283 gigawatt hours in 2022, is it an investment that you should consider for your own portfolio?

Well, today, we’ll be giving you the full breakdown of everything you need to know about investing in solar energy, from the good to the bad, and whether it’ll suit your goals. Carry on reading to learn more!


What is Solar Energy?

In simple terms, solar energy is the power that first comes from the sun and then is converted from power into electricity through different types of solar devices. One of the most popular is solar panels: The sun beams down on the panels, which absorb the heat and this energy creates electrical charges, making electricity flow to the places in need.

Solar energy is also a renewable source of energy, meaning that no matter what happens, it can continue to work because it comes from a natural source. It’s not like the sun can be taken down, so it must be an infinite supply of energy.


What Are the Different Types of Solar Energy Stocks You Can Invest in?

When looking to invest in solar energy, there are two types of ways to do so:

  1. Through an individual company and stock
  2. Through a solar energy fund, where they invest in multiple assets


This essentially means that you can try to predict what companies within the solar energy market are going to perform well, or you can trust another company to invest in solar energy companies for you in a more diversified manner.


Examples of Popular Solar Energy Investments 2024

As far as some of the most popular types of solar energy stocks at this current moment in time (June 2024), from different parts of the world are:

  • First Solar (US-based)
  • Greencoat UK Wind (UK-based)
  • SSE (UK-based)
  • Enphase Energy Inc. (US-based)
  • Brookfield Renewable (Canada-based)
  • ITM Power (UK-based)
  • Sunrun (US-based)


These are just a few of the popular stocks to choose from right now on the stock market from across the globe. Note: This doesn’t mean these are the best stocks to invest in, these are simply just a few of the most popular stocks in the UK and worldwide based on market cap, potential, technology, and many more factors.


The Benefits of Investing in Solar Energy

So, you want to know what the advantages of being in the solar/renewable energy market are. Well, here are some of the main benefits we see from previous history and future potential, with some statistics both from IEA and Statista included.

First of all, the expected growth rate for the solar industry is expected to be 27% from 2021 to 2031. As seen by the graph here, this is the current globally installed solar PV capacity gigawatts:

Chart to show the advancement and number of solar PV capacity in Asia are far greater than in any other region in the world

This graph clearly shows that the advancement and number of solar PV capacity in Asia are far greater than in any other region in the world.

Here are also some more benefits of investing in this sector:

  • It is the most abundant and clean energy in our planet – reducing the carbon footprint
  • People who use it save about 35 tonnes of CO2 emissions and 75 million barrels of oil a year
  • In our country, more than 17,000 households installed solar panels each month in 2023
  • They are a reliable source of energy for people who choose to use it
  • There will most likely always be funding and incentives given by the Government
  • It is a great way to show your passion for sustainability and climate change
  • You can spread risk by investing in ETFs


The Drawbacks of Investing in Solar Energy

While there are many benefits to investing in solar power, there are also a lot of drawbacks that you must be aware of:

  • The volatility of these stocks will be hard to deal with and the future is not predicted
  • Changes in policies, rules, and regulations could seriously harm your investments
  • If you’re investing in individual companies, if it goes bust, you’ll lose all your money
  • There is increased competition in this field, meaning profit margins and market share are affected
  • It’s difficult to integrate both renewable energy sources and the national grid
  • Putting all your eggs in the renewable energy sector, even if you’re in ETFs, can be risky


Should You Invest in Solar Energy?

So, is solar energy a good investment? Well, in some cases, we believe that investing in solar energy solutions can be beneficial; for example, if you want to invest in eco-friendly assets and try to change the world into a greener environment.

However, if you’re doing it solely for monetary purposes, putting all your money in one company or sector can be extremely risky to your portfolio, as you’re not as diversified as you could be.

Yet, if you’re extremely passionate about climate change and changing our future (i.e., using more renewable energy sources), then this could be a great way to put money towards solar projects you’re passionate about.


How to Invest in Solar Energy Stocks

If you’ve decided that investing in solar technology is in your best interest, this is how you can begin putting your money into the sector:

  1. Open a stocks and shares ISA or trading account
  2. Search through companies or ETFs that align with your values
  3. Choose the amount you want to invest in it or them
  4. Deal your shares in the stock or ETF
  5. Wait for your order to be confirmed
  6. There you go, now you have shares in that company or ETF!


It is really easy to get into the market and invest in solar energy. However, the main point that you need to understand is that you must do your research on the sector and realise that investing in these stocks or funds may or may not provide you with returns over the years.

In fact, Morningstar stated that sector equity alternative energy funds (which also include ETFs) had an average return of -11% in 2022, -10.5% in 2023 and -4.3% for this year (as of April 15, 2024), meaning the returns recently haven’t been positive. Yet, if you’re really passionate about this sector, you may want to contribute to it in the hope that it grows.


Bottom Line

Yes, investing in solar energy isn’t straightforward and guaranteed to yield returns but neither is any other stock. However, the historical performance of this sector has not been great and has been quite volatile in its good and bad years.

The typical index fund, as measured by the S&P 500, has returned between 7-8% a year (adjusted to inflation) for pretty much its entire history. Whereas, with this sector, there’s a lot less certainty about its growth.

Therefore, as we said, do your research and make sure you’re investing in this sector for the right reasons, rather than to make a profit, as you may be disappointed.

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