Looking For ‘Safe Investment’? Try Solar PowerPosted on Monday, April 2nd, 2012 at 8:59 pm by Solar Energy USA
Google is one of the world’s largest and most profitable businesses. Warren Buffett is one of the world’s richest businessmen. So when the two both look to solar power as an investment, well, people notice.
Over $500 million dollars was invested in renewable energy last year. Investors include some big business players like Warren Buffett’s Berkshire Hathaway, Google, MetLife, and John Hancock Life Insurance Co. And, according to Bloomberg, it was the most money ever invested in solar by companies outside of the renewable energy realm.
Why is solar power such an attractive investment? It could be the 15% return after taxes, higher than most bonds, or it could be the fact that solar is now considered ‘bankable’ or less risky and part of a broader market.
In California, where the largest solar power plants are being installed, regulators approved contracts in 2010 for utilities to pay $161 to $232 a megawatt-hour (MWh) for solar energy. That’s at least four times the $40 average wholesale price in Southern California.
“A solar power project with a long-term sales agreement could be viewed as a machine that generates revenue,” said Marty Klepper, an attorney at Skadden Arps Slate Meagher & Flom LLP, which helped arrange a solar deal for Buffett. “It’s an attractive investment for any firm, not just those in energy.”
Small and mid-sized businesses have taken note of the solar investment wave that has been gaining popularity with the Fortune 500 companies.
According to Dan Reicher, executive director of Stanford University’s center for energy policy and finance in California. “The beauty of solar is once you make the capital investment, you’ve got free fuel and very low operating costs.”
Wal-Mart Inc. is the second-biggest buyer of electricity from renewable sources and is also considering buying projects. The steady returns from solar farms may meet the retailer’s threshold, said Greg Pool, Wal-Mart’s renewable energy director.
As for individuals, consider an investment in a new solar roof for your home as you would a bank CD (certificate of deposit). You set aside X dollars for a set time period given a guaranteed interest rate (say 10 percent over 6 years). The purchase of some shiny new solar panels to be installed on your roof is the same as the CD you would purchase from a bank. Your investment is designed to pay interest in the form of power, which you, the solar homeowner, then sell to the local power company. Live in your house for 6 years, using power every day, and your solar investment will pay for itself. Given that power rates have increased 10% or more over the past few years, it’s easy to see how a solar power investment can be a smarter choice to invest in than an online savings account paying 1% (if you’re lucky enough to find one), and safer than a stock.