Solar power has been a popular industry this year, as government programs have encouraged the use of solar systems for both residential and commercial buildings throughout the United States.
President Obama recently announced an initiative to clean up U.S. emissions by regulating each state's efficiency and requiring further investment in renewable energy options. Many investors believe that such changes will help the solar industry grow even larger, making solar stocks a popular investment option.
However, as with anything else that depends heavily on policy, the success of solar depends largely on what's to come in the months ahead. Some states may limit solar customers' ability to feed solar to the grid, something that will significantly decrease the value of adding solar technology to homes and commercial buildings. The 30 percent investment tax credit enjoyed by residential buildings that have installed solar power is set to expire at the end of this year, taking with it a good part of the investment tax credit that commercial installations benefitted from as well.
While the change in tax law hasn't been set in stone yet, many worry that the loss of such benefits will weigh on the solar industry.
Despite the many obstacles in solar power's future, many analysts see the industry continuing to thrive. Those who expect policy changes to have a drastic impact on the sector say that there will be an initial drop in solar installations, but that the industry will continue to grow, just at a slower pace. Others say policy worries are overdone, and even without the tax credit system, solar capacity will quadruple by 2022.
For those who believe in a solar revolution, there are several options when it comes to investment in the industry. Here's a look at eight options for solar investors.
1. Guggenheim Solar ETF TAN
Guggenheim Solar is an ETF that gives investors exposure to the solar industry on a broad scale. The fund is made up of around 25 stocks with ties to the solar space, including those that produce equipment and products for end users, fabrication product manufacturers and service companies within the industry.
Questions about the stability of the industry have caused Guggenheim Solar's price to decline by 22.79 percent, but many analysts believe that patience is key when it comes to the solar space and that buying in now could provide a cheap entry point in a space that is set to continue growing.
2. Solaredge Technologies Inc SEDG
Solaredge Technologies Inc is a semiconductor firm that operates within the solar industry. The company boasts a large number of big-name clients from within the solar space, including SolarCity and SolarRun Inc.
Not only is Solaredge's technology (which keeps solar panels functioning independently of one another) considered revolutionary, but the firm has partnered with Tesla Motors to enter the power-storage space as well.
Solaredge shares recently rallied by more than 7 percent, but concerns about the industry have led the company's shares to lose 46.61 percent over the past six months.
3. Tesla Motors Inc TSLA
Tesla Motors made its name creating luxury electric cars, but the firm has a sizable stake in the solar industry as well. Earlier this year, Tesla CEO Elon Musk announced that the company would introduce a new line of batteries capable of storing solar power for later use.
This kind of technology could be a key factor in the industry's survival, especially if selling energy back to the grid influences the cost-effectiveness of installing solar panels. The batteries will be aimed at everyone from private homeowners to utility firms and other businesses, as they will allow customers to save energy for usage when the sun isn't shining.
4. SolarCity Corp SCTY
With Tesla CEO Elon Musk on the board, SolarCity has fostered a natural partnership with Tesla Motors; the firm's new batteries will work for homeowners that are SolarCity clients.
The company sells solar renewable energy to customers across 15 U.S. states and the District of Columbia, and recently made a move to start creating its own line of solar panels.
SolarCity shares have taken a beating in recent weeks, as the firm's third-quarter earnings report revealed significant losses, leading investors to believe the company is struggling. However, for investors looking to get in on solar while it's cheap, the company's $29.04 price tag may be attractive.
5. SunPower Corporation SPWR
SunPower is a popular option for traders who want to invest in a company that creates the panels needed to generate solar power.
SunPower is an industry leader in solar panel manufacturing at the moment; the firm has created the most efficient panels available at 22.8 percent. The fact that the company has focused on efficiency has made it a good choice for residential users. Since its inception, the firm has long focused on premium products; however, this year SunPower introduced a new, more affordable line of solar panels that could help bump up the company's market share.
The budget panels are significantly less efficient at just 17–19 percent, but many believe that the company will succeed in breaking into the low-cost market.
6. First Solar, Inc. FSLR
First Solar is a competitor of SunPower, as the firm also makes highly efficient solar panels that function at around 20 percent.
Unlike many of its solar industry peers, shares of First Solar have increased significantly over the past three months due in large part to impressive third-quarter earnings results. The firm's revenue rose to $1.27 billion from $889.3 million last year, and the company's improvements in panel efficiency appear to be paying off.
Many took the firm's impressive financials as a signal that First Solar is one of the strongest players in the solar industry, which has helped push the company's share price up 20.02 percent over the past three months.
7. Trina Solar Limited (ADR) TSL
For investors with a stomach for risk, a Chinese solar company could be a good play – the nation's efforts to cut down on emissions have created a huge market for solar panels.
Trina Solar is an integrated solar power products manufacturer headquartered in China that could give investors access to the rapidly expanding market for renewables in China.
However, questions about government-backed financing have cast a shadow of uncertainty over Chinese-operated companies. For those willing to overlook trust issues with Chinese regulators, Trina could be in a good position for 2016, as currency tailwinds and growing demand will likely bump up the firm's sales.
8. Sunedison Inc SUNE
Sunedison is another play for investors who are comfortable with a great deal of risk. The firm has been under more pressure than its peers this year, and its share price has lost 84.93 percent so far this year.
That's due in large part to the firm's inability to turn a profit over the past few years and a failure to differentiate itself from other competitors. However, with a low share price and high potential to grow, the firm could be a diamond in the rough.
In an effort to turn things around, Sunedison's management has promised to maximize long-term value and cut down on operating costs. Sunedison is also likely to benefit if the investment tax credit is extended before the end of the year, something that could persuade more investors to consider the firm's merits.
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