If Only I Were Younger: Investing In Solar Energy

Originally published on Thoughts of a Lapsed Physicist.
By Allan R. Hoffman

As I write this early in my 79th year I am aware not only of my mortality (although I don’t spend much time on that except for getting my bucket list and will in order) but also of the investment opportunity that is coming and that I can’t really take advantage of. It’s long term, longer than I likely have.

It is the realization that the solar revolution is finally unfolding and that we are in the early stages of a sea change that will change the energy picture in major ways for our children and grandchildren over the next few decades of the 21st century. It is an exciting time to be alive, with all the changes coming, but the transition will take time as history teaches. There will also be ups and downs along the way – e.g., the fact that some governments in Europe recently and retroactively cut subsidies and Introduced import tariffs on low cost Chinese solar panels. But the long-term trend is clear.

I say this after forty plus years in the clean energy field, going back to 1969, and being overwhelmed recently by the burgeoning literature on solar and other renewables that appears on my iPad every day – e.g., the following interesting and encouraging piece on ‘community solar’ that appeared recently in the Washington Post’s Energy and Environment section:

“There’s a tense dynamic accompanying the rapid growth of solar in the United States—in which traditional utility companies, nervous about the spread of rooftop solar panels, are seeking ways to limit the revenues made by solar customers who earn credit for the extra electricity they provide to the grid.

This battle over so-called “net metering” has been often depicted as a zero sum conflict between an upstart and an incumbent — but new research out of the University of Texas at Austin suggests there could be a kind of “middle ground” in the conflict between some utilities and solar installers.

The potential “win-win,” as the researchers put it, involves so-called community solar — solar energy projects or panels that are in effect shared by a group of people, such as the inhabitants of an apartment building, rather than sitting on a single residential rooftop. The study, recently published in Energy Research & Social Science and led by Erik Funkhouser of the LBJ School of Public Affairs at the University of Texas at Austin and three university colleagues, found that at least some utility companies seem to like community solar programs, are already offering them, and plan to expand them.

I could list many other articles that lead to the same conclusion, that some U.S. utilities have finally begun to come to grips with the reality that renewable energy (not just solar but also hydropower, wind, geothermal, biomass, ocean energy), when combined with a smart national grid and cost-effective energy storage, can eventually provide the vast majority of our electrical energy needs, including the anticipated demand growth from electrified transportation vehicles. Utilities in Germany came to this conclusion earlier, largely due to Germany’s energy policy that encouraged installation of wind, solar, and other renewable energy technologies through provision of so-called feed-in tariffs (FiTs). FiTs are a policy mechanism that provides an extra fee (tariff) above the retail rate of electricity to provide long-term security to renewable energy producers, typically based on the cost of generation of each technology.

At this point in time solar energy is the fastest growing energy source in the world today, having recently passed wind energy for this distinction. Of course solar starts from a small base and has a long way to go to provide a significant share of the world’s electrical energy. Nevertheless, when one looks at recent trends in various countries such as the UK, China, India, Australia, and others, let alone the U.S., it is clear that large parts of the world have accepted the inevitability of a renewable energy future, with a large part of that future being based on solar energy. In addition, African nations are beginning to expand their economies and take advantage of their extensive renewable energy resources, particularly solar, and the related investment opportunities are huge.

All this leads me to believe that the transition to renewables is well underway and offers not only investment opportunities for those with insight and patience, but also a response to the challenge presented by global climate change. With care being paid to where the investments are made, the financial returns should be quite impressive in the decades ahead. If only I were younger.

Reprinted with permission.