Alternative Investments: How Solar Energy Can Power Your Portfolio

Rising energy costs present a challenge, one that you could be turning into an opportunity. Solar energy is an alternative investment that offers a possible hedge against inflation with the potential to generate consistent passive income. With availability almost everywhere on the planet and significant growth to the industry over the last few decades, solar power is a reliable renewable resource and an attractive investment option.

Since the initial development of solar energy cells in the 1950s, the industry has steadily grown with scientific study and innovation creating versions of solar cells that are easier and cheaper to manufacture. The demand for this technology is driven by increasing climate concerns and it’s bolstered by government incentives and policies around the world. Tax credits and subsidies have sustained the growth of this alternative energy option. Both political and business leaders are interested in investing in this sector, banking on continued growth and the possibility of becoming less dependent on fossil fuels in the future. Solar energy is a viable option as it’s not subject to geopolitical risks the way oil and gas often are. All of these reasons make solar energy an attractive investment option.

Ways to Invest in Solar Energy

• Solar Stocks: Publicly traded companies like First Solar (FSLR), SunPower (SPWR), and Enphase Energy (ENPH).
• Production & Innovation Investments: Companies developing new solar technology and infrastructure.
• Debt Financing in Solar Infrastructure: Project finance debt (investing in a specific solar project and receiving interest payments) or corporate debt (lending to solar companies for expansion and receiving fixed income).

There are some risks associated with solar energy investing. Solar energy production can be subject to fluctuations in weather conditions, equipment malfunctions, and supply chain disruptions. Regulatory and governmental policy changes could lead to a lack of tax breaks and incentives that would impact the whole asset class’s profitability. However, some investors have had great success with this investment despite its risks. There is an increasing demand from individuals and companies for socially responsible and sustainable investments. Solar energy usually checks both of those boxes!

Investors often find solar energy to be an attractive investment, offering the potential for long-term growth, overall stability, diversification, and a possible hedge against inflation. There is also the added benefit of being a sustainable commodity that can align with Environmental, Social, and Governance (ESG) goals making solar energy a socially responsible choice. All investors should ensure solar energy is right for their specific needs and goals by considering the risks and consulting with a wealth advisor to ensure a smart financial strategy. 

The sun is an unlimited resource and investing in it could be a bright opportunity. If you’re curious to learn more about commodities and other alternative investments, tune into the Alternative Investments Chat podcast where hosts Erica and Erin discuss various asset classes and financial news.