Investing in solar stocks from Australia

As global attitudes toward fossil fuels continue to shift, the renewable energy sector becomes an increasingly attractive portfolio addition for investors in Australia. 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:

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 $US52.5 billion in 2018. And that figure is projected to rise to $US223.3 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 in Australia 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 about $US3 per watt — which shakes out to about $US15,000 to $US30,000 for the installation, all told.

Solar energy is less of a novelty than it once was, which means it’s becoming more affordable as 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.

Solar stocks

There are a variety of companies in the solar energy category, including module developers, cell manufacturers, renewable energy generators, and more.

This includes dedicated solar companies like New Energy Solar, large ASX-listed energy companies like AGL and Origin, as well as mining companies like Mineral Resources.

What ETFs in Australia track the solar energy category?

While there currently isn't an ASX-listed ETF that focuses on solar energy stocks, there is an ETF for clean energy: the VanEck Vectors Global Clean Energy ETF (CLNE). This exchange-traded fund includes a range of green energy stocks, from solar energy stocks to eco-friendly utility stocks. You could also invest in eInvest Future Impact Small Caps Fund, a managed fund that offers access to solar stocks on the Australian and New Zealand market.

If you're looking for an exchange-traded fund solely focused on the solar energy category, then you might consider investing in the Invesco Solar ETF (TAN) which is available on the US market.

To achieve better portfolio diversification, Australians could invest in renewable energy ETFs on overseas exchanges, including options such as:

Compare trading platforms

To invest in solar energy, you’ll need a brokerage account in Australia. Review your options below.

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Name	Product AUFST	Price per trade	Inactivity fee	Asset class	International
eToro Exclusive		US$2	US$10 per month if there’s been no log-in for 12 months	ASX shares, Global shares, US shares, ETFs	Yes	Exclusive: Get 12 months of investment tracking app Delta PRO for free when you fund your eToro account. T&Cs apply. Trade stocks, commodities and currencies from the one account and get access to social trading.	Go to siteMore Info Compare	loading Fetching your data...
CMC Invest Finder AwardExclusive		$0	$0	ASX shares, Global shares, Options trading, US shares, ETFs	Yes	Finder exclusive: Get $100 trading credit when you transfer $10k+ of either Australian or international stocks to CMC Invest. Only available for the first 50 new clients to participate. Use promo code “100CMC”. T&Cs apply. Trade over 45,000 shares and ETFs from Australia and 15 major global markets. Plus, buy Aussie shares or ETFs for $0 brokerage up to $1,000 (First buy order of each security, each day - excludes margin loan settled trades).	Go to siteMore Info Compare	loading Fetching your data...
Tiger Brokers Finder AwardExclusive		US$1.99	$0	ASX shares, Global shares, Options trading, US shares, ETFs	Yes	Finder exclusive: Get 10 no-brokerage US or ASX trades in the first 180 days, plus US$30 NVDA shares (+US$30 TSLA shares ) when you deposit AU$2000 or more. Get 7% p.a. on uninvested cash for 30 days. T&Cs apply. Trade US, Asian and CHESS-sponsored ASX stocks and US options.	Go to siteMore Info Compare	loading Fetching your data...
Moomoo Share Trading Exclusive		US$0.99	$0	ASX shares, Global shares, Options trading, US shares, ETFs	Yes	Finder exclusive: Unlock up to AUD$4,000 AND US$4,000 in $0 brokerage over 60 days. T&Cs apply. Trade US, Asian and CHESS-sponsored ASX stocks and get access to social trading	Go to siteMore Info Compare	loading Fetching your data...
Superhero share trading Exclusive		$2	$0	ASX shares, US shares, ETFs	Yes	Sign up with code ‘finder24’ and get US$10 of Nvidia stock when you fund your account with $100 or more within 30 days. T&Cs apply. Enjoy US$2 brokerage (other fees may apply) on US stocks and buying ETFs as well as $2 fee to trade Australian shares up to $20,000.	Go to siteMore Info Compare	loading Fetching your data...

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Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

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.

Frequently asked questions

• Do solar stocks pay dividends?

  Some do, including Brookfield Renewable Partners, NextEra Energy Partners and TerraForm Power.

Written by

Shannon Terrell

Writer

Shannon Terrell is a writer for Finder who studied communications and English literature at the University of Toronto. On any given day, you can find her researching everything from equine financing and business loans to student debt refinancing and how to start a trust. She loves hot coffee, the smell of fresh books and discovering new ways to save her pennies. See full bio