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Investing in solar stocks

Solar energy is on the rise, but upfront consumer costs may hamper profitability.

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As global attitudes toward fossil fuels continue to shift, the renewable energy sector becomes an increasingly attractive portfolio addition. But until technology costs come down, solar energy may remain a luxury in the eyes of most consumers.

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.

Financing options for solar energy and solar energy panels

Solar stocks

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.

Name Product Available asset types Stock Fee Option Fee Account Fee ETF Transaction Cost Feature Table description
Wealthsimple Trade
Stocks, ETFs
$0
N/A
$0
Free
Deposit and trade $100 and get a $50 bonus.
Pay no commissions when you trade Canadian stocks and ETFs with Wealthsimple Trade.
CIBC Investor's Edge
Stocks, Options, Mutual Funds, ETFs
$4.95 - $6.95
$4.95 - $6.95 (+$1.25 per contract)
$0 if conditions met, otherwise $100/year
$6.95
$4.95 - $6.95 is applicable for online stock, ETF and option trades only. Pay $4.95 when you qualify as an Active Trader (trade 150+ times per quarter).
An intuitive and easy-to-use platform with access to a variety of tools that help you make smart decisions and trade with confidence.
Interactive Brokers
Stocks, Bonds, Options, ETFs, Currencies, Futures
Min. $1.00, Max. 0.5% of trade value
$1.50 min. per order
$0 (if monthly commissions are greater than or equal to US$10.00)
Min. $1.00, Max. 0.5% of trade value
Extensive trading capabilities and global investment tracking.
Access market data 24 hours a day, six days a week and invest in global stocks, options, futures, currencies, bonds and funds from one single account.
Questrade
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals
$4.95-$9.95
$9.95 + $1 per contract
$0
Free
Get $50 in free trades when you fund your account with a minimum of $1,000.
Opt for self-directed investing and save on fees or get a pre-built portfolio and take some of the guesswork out.
Qtrade Investor
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $8.75
$6.95 - $8.75 + $1.25 per contract
$0 if conditions met, otherwise $25/quarter
$0 - $8.75
Trade 100 select ETFs free of charge.
Qtrade Investor offers low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options. Trade 100 ETFs free of charge and thousands more for $8.75 or lower.
Scotia iTRADE
Options, Mutual Funds, ETFs, GICs, International Equities
$4.99-$9.99
$9.99 + $1.25 contract ($4.99 + $1.25 contract if completed 150 trades or more a quarter)
$0
$9.99 ($4.99 if completed 150 trades or more a quarter)
Pay no annual account fees.
Buy, sell and trade ETFs, Equities, Options and more with competitive commissions.
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Compare up to 4 providers

Bottom line

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.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.
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