Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
Investing in solar stocks
Solar energy is on the rise, but upfront consumer costs may hamper profitability.
Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our opinions or reviews. Learn how we make money.
What are solar stocks?
Solar stocks are stocks from companies involved in the generation of solar energy and the manufacturing of solar energy technology.
Solar energy is one of several forms of renewable energy — an emerging market category that continues to gain traction as we pivot from oil reliance to more sustainable energy technologies, including solar, wind, hydro, tidal and geothermal energy.
There are numerous companies in the solar energy space. These companies produce the technology that allows us to capture energy from the sun and convert it into electricity. The types of companies that fall within the solar energy category:
- Manufacture solar modules and cells
- Manufacture power optimizers and inverters
- Install solar panels
- Design solar power systems
- Operate solar energy generators
Why invest in solar stocks?
Energy fuels our world. It’s a global resource we rely on and the way we produce and consume energy is changing. In light of growing environmental concerns, there has been a global shift from traditional energy stocks toward renewable energy. And solar power is a massive component of the renewable energy market.
According to Allied Market Research, the global solar energy market was worth $52.5 billion in 2018. And that figure is projected to rise to $223.3 billion by 2026. The market is changing. The demand for oil is dropping. And solar stocks present a potentially lucrative long-term growth opportunity.
Investing in renewable energy also gives you the opportunity to add assets to your portfolio that impact the environment in a positive way. Solar energy can help reduce carbon dioxide emissions and lessen our impact on the environment. If you’re looking to add some socially conscious investments to your portfolio, solar stocks fit the bill.
Risks of investing in solar energy
Two major concerns for investors interested in solar energy are expenses and manufacturing.
Right now, solar energy is expensive. It’s expensive to manufacture, it’s expensive to install and it’s expensive to maintain. And while the high cost of solar energy means higher profits for solar companies, it also acts as a deterrent for consumers. To outfit a residential home with solar panels, consumers can expect to pay between $2.34 and $4.00+ per watt depending on the province or territory in which you live. This shakes out to about $20,000 to $30,000 for the installation when all is said and done.
Solar energy is less of a novelty than it once was, which means it’s becoming more affordable as the technology advances. But it still has a ways to go before it’s as accessible and mainstream as fossil fuel.
Another concern for investors is how solar cells and modules are manufactured. Some of the components of solar technology require rare earth metals that are acquired as a byproduct of other mining processes. Should the demand increase, the supply chain could be threatened. Other solar materials make use of the same hazardous materials as electronics, which presents disposal challenges.
Before you buy in, investigate the companies you’re interested in backing to find out more about their manufacturing processes and protocols.
There are a variety of companies in the solar energy category, including module developers, cell manufacturers, renewable energy generators and more.
Do solar stocks pay dividends?
Some do. For example, Algonquin Power & Utilities Corp. (TSX: AQN), Brookfield Renewable Partners LP (TSX: BEP.UN) and Northland Power Inc. (TSX: NPI.TO) all issue dividends to shareholders. As of the time of writing, Etrion (TSX: ETX) does not pay dividends.
What ETFs track the solar energy category?
There’s only one exchange-traded fund solely focused on the solar energy category: the Invesco Solar ETF (TAN).
Outside this, you can invest in renewable energy ETFs that contain solar stocks, but be aware that these ETFs also track a number of other companies in the renewable energy category, including wind and hydroelectric energy.
- Invesco Global Clean Energy ETF (NYSEARCA: PBD)
- First Trust ISE Global Wind Energy Index Fund (NYSEARCA: FAN)
- First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (NASDAQ: GRID)
- Invesco Cleantech ETF (NYSEARCA: PZD)
- Invesco Solar ETF (NYSEARCA: TAN)
- Global X YieldCo & Renewable Energy Income ETF (NASDAQ: YLCO)
- SmartETFs Sustainable Energy II (BATS: SULR)
- SPDR S&P Kensho Clean Power ETF (NYSEARCA: CNRG)
Are there any solar energy ETFs that trade on Canadian stock exchanges?
As of the time of writing, no. To invest in solar energy ETFs, you have to access stock exchanges outside Canada like the NASDAQ or NYSE in the US. There are several Canadian-based brokerages that offer access to international exchanges on which solar energy ETFs trade including Interactive Brokers and Questrade.
Alternatively, you can also buy stocks in clean energy companies that trade on Canadian stock exchanges like Etrion (TSX: ETX) and Algonquin Power & Utilities Corp. (TSX: AQN), both of which deal heavily in solar energy technology.
Compare trading platforms
To invest in solar energy, you’ll need a brokerage account. Review your options below.
Solar energy offers investors a socially conscious investment opportunity with long-term growth potential. But until the technology becomes more widespread, the high cost to consumers may impede profitability.
Explore your brokerage account options with multiple platforms to find the account best suited to your investment needs.
More investing guides
Invest in companies that work to address environmental and social issues, and adhere to sustainable corporate governance requirements.Read more…
Put your money where your mouth is by rethinking how you invest to support BIPOC, LGBTQ+ and other marginalized communities.Read more…
How to invest for retirement: 8 ways to safeguard your portfolio.Read more…
More guides on Finder
Invest in companies that work to address environmental and social issues, and adhere to sustainable corporate governance requirements.
How to master international stock trading with currency hedging
Protect your international stock portfolio from currency fluctuations by hedging your investments.
How to invest in renewables
Investing in renewable energy isn’t just good for the planet—it can be good for your portfolio too.
10 ways to invest for social justice
Put your money where your mouth is by rethinking how you invest to support BIPOC, LGBTQ+ and other marginalized communities.
Electric vehicle (EV) stocks to watch and how to invest
We take a closer look at 6 popular EV stocks and what these stocks can offer Canadian investors.
Investing in pipeline stocks
Benefits and risks to consider before you invest in pipeline stocks.
Investing in pharmaceutical stocks
Benefits and drawbacks to consider before you invest in pharma stocks.
Investing strategy: How growth stocks can make you money
Learn how to strategically find and invest in booming companies.
Investing in healthcare AI stocks
Looking to buy into the healthcare AI industry? Check out these stocks and ETFs, and learn more about how to invest.
Investing in materials stocks
Explore the benefits and risks of investing in raw materials.
Ask an Expert
You must be logged in to post a comment.