"Many solar companies should offer great returns for years to come"
Most solar companies offer abysmal returns. Major US companies have gone bust. Well run companies can blow up if the government changes policy on subsidies. In Ontario - the government just decided they would stop paying 82 cents/kw/h for solar, and dropped it to 50 cents/kw/h. Imagine what that would do to your balance sheet.
You can make possibly better returns, but it's not remotely 'low risk'.
Getting out of the 3% ROI range is quite hard while not getting into extra risk.
Just popping in here with the customary reminder that even if the sector is growing rapidly, that does not make any individual company in that sector automatically a good investment. Just look at the giant graveyard of solar panel companies that went bankrupt.
There are going to be some huge companies thanks to solar. Those companies are also going to have big valuations, at least until the market is much more mature and saturated, but we're decades away from that.
As Ramez said, you don't bet on an "emerging industry", you bet on the winners in that emerging industry, otherwise you may very well lose your money. When new industries are born there are usually hundreds of competitors in the beginning, but eventually only a few big ones remain, and it's usually those that started early and got big early.
My solar investments sure havent done well. It doesn't seem to make sense neither. They ought to basically be amortized and pure profit.But they all seem to do so poorly.
In the US, it is really hard to sell solar in a lot of places. This can be true even for houses where it would obviously be useful and even when incentives make it so obvious that anyone _should_ do it.
Companies minimize their sales cost by using the lowest cost, most effective salesmen that they can find and don't monitor them very much.
Perhaps unsurprisingly, the ones that you hear from the most are the ones that you almost certainly shouldn't do business with.
I feel like there should be some term for this kind of market, where the worst of the worst natural rise to the top for periods of time.
Sure, the term might not be the most appropriate one, but if we are talking about choosing the most effective use of capital to create energy, and one method has negative externalities that are shared by the whole world but are not taxed, and one method does not, then it's much harder for solar to be an attractive option. The market is skewed.
And look at what happened to SolarCity, and similar firms. That space is unable to operate profitably, despite large federal subsidies. It also has no shortage of scammy ownership/loans-for-your-solar-install model, is a bad investment for most homeowners, and doesn't even answer the hundred-thousand-dollar-per-home question of peak energy storage. (Or how it can operate in a world where you are on an even playing field for selling power to the grid as the utility.)
The home solar industry makes most power utilities look both efficient and competent.
It's a very valid point. However, here's my armchair conclusion - energy efficiency is crazy hard. I invested in a solar company about ~5 yrs ago and watched as the market rarely met expectations. No idea where it is now, but my general conclusion was that the cost to do business in this area rarely outweighed the benefits (i.e. profits).
If small commercial solar operations are in fact cheap and have a high return then why am I not seeing startup solar power generation companies everywhere? Surely it would be a hot industry to get into if you can put it anywhere and make a profit?
You could say the same thing about almost any mature technology though. Meanwhile there are incredible amounts of money being made in solar. A friend has a solar installation business, he's been hiring more people year after year and is doing very well for himself and his co-founders.
I think that many of the most visible parts of the solar value chain (the panels and the installers) are very competitive industries that are going to be poor investments. However, there's always some segment of the value chain that is condensed into a few technologically-advanced and capital-intensive companies. I think we'll see this with solar as well, and there will be trillion-dollar companies that come out of it.
Does this make solar a great industry to invest in because of the growth potential, or a terrible industry to invest in because the prices are racing to the bottom?
I was just musing about the economics. Ultra-cheap solar drives steam turbine based competitors to have only about 50% utilization. I am not sure what that will do to the overall market.
Regulation isn’t a good moat. Solar panels are a commodity- it’s a race to the bottom. Solar looks like (and has been) the storybook case of a positive trend that makes for a poor investment.
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