Investing in solar stocks from Australia

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 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:

  • 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 $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.

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:

  • ALPS Clean Energy ETF (ACES)
  • First Trust ISE Global Wind Energy Index Fund (FAN)
  • First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID)
  • Global X YieldCo & Renewable Energy Income ETF (YLCO)
  • Invesco Cleantech ETF (PZD)
  • Invesco Global Clean Energy ETF (PBD)
  • iShares Global Clean Energy ETF (ICLN)
  • SPDR S&P Kensho Clean Power ETF (CNRG)

Compare trading platforms

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

Name Product Standard brokerage fee Inactivity fee Markets International
eToro (US, EU stock trading)
US$0
US$10 per month if there’s been no login for 12 months
US shares, ETFs
Yes
Zero brokerage share trading on US stocks with trades as low as $50.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
Superhero share trading
$5
No
ASX shares, ETFs
No
Pay zero brokerage on all Australian ETFs.
Trade ASX stocks with a flat $5 commission fee and a low minimum investment of just $100.
ThinkMarkets Share Trading
$8
No
ASX shares, ETFs
No
Limited offer: Get 5 free ASX trades when you open a new account with ThinkMarkets before June 30, 2021 (T&Cs apply).
Buy and sell CHESS sponsored ASX shares with $0 brokerage on your first 5 trades. Only $8 flat fee brokerage thereafter, plus enjoy free live stock price data on an easy to use mobile app.
Bell Direct Share Trading
$15
No
ASX shares, mFunds, ETFs
No
⭐ Finder Exclusive: Get 5 free stock trades and unlimited ETF trades until July 31, 2021 when you join Bell Direct.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
IG Share Trading
Finder Award
IG Share Trading
$8
$50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares
Yes
$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
Saxo Capital Markets (Classic account)
$6.99
No
ASX shares, Global shares, Forex, CFDs, Margin trading, Options trading, ETFs
Yes
Acess 19,000+ stocks on 37 exchanges worldwide
Low fees for Australian and global share trading, no inactivity fees, low currency conversion fee and optimised for mobile.
CMC Markets Stockbroking
$11
No
ASX shares, Global shares, mFunds, ETFs
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges.
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Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. “Standard brokerage” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. 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

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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