Why Solar Energy Is a Bad Investment

For the past year or so, the cost of solar energy products and components has been on a steady decline. That is thanks, in part, to the fact that so much competition has driven prices down and made them more affordable. It has also helped that the Great Recession put a damper on consumer spending, particularly on more expensive items so it is not just about reducing your energy bills anymore but also investing in environmentally friendly and sustainable energy products.

Cost Is One Reason

The cost of solar energy in 2020 is at its lowest since 2017 and this is largely thanks to the pandemic and its effect on the solar industry. However, during the good times, the cost of solar energy was almost half that of regular electricity, so this is no time for penny pinchers. With solar energy now cheaper than ever before, it makes sense to consider investing in this form of energy. But, as we have discussed previously, not all solar energy investments are created equal. Here are some important considerations before buying into this trendy energy source.

Technology Is Changing The Game

Even as we write this article in the middle of May, solar technology is still making waves and changing the game for the better. A few years ago, solar energy was considered a luxury item only affordable to the wealthiest consumers. But today, major solar manufacturers like SolarWorld have lowered the price point so much that the Sunshine State no longer feels so sunny.

Solar power generation costs have been declining across the board thanks to improved technology and the efficiencies of mass production. The result is that solar energy now presents a good opportunity to enter the market and profit from what is, arguably, a green and sustainable energy source.

Risks Of Investing In Solar Energy Are Real

Even as the cost of solar energy has declined, this is also marked by increased competition, which presents some risks for investors. This is particularly so in an already saturated market with many players and over 600 companies currently doing business in the space. Amidst all this competition, it is difficult to know where to put your money and what returns to expect. Buying into an already crowded market makes it even more risky because the chance of gaining profits from this investment are rather slim.

More Regulation Is On The Horizon

When Congress passed the Clean Energy Policy Act in 2015, it was mostly seen as a job creator and a revenue stream for utilities and manufacturers. However, the long-term effect of this law may not be as good as anticipated. As a result of this law, the U.S. government has become significantly more involved in regulating solar energy, even as the industry continues to grow.

The news out of Washington D.C. in 2021 is that the government may ban the sale of solar-powered lightbulbs. This proposal has been made in order to reduce energy waste and better protect the environment. So if you are going into the solar energy market now more than ever, know that the government is watching you. Keep in mind also that when it comes to renewable energy, more regulation is always a good thing.

Energy Diversification

For years, many experts and financial planners have been preaching the benefits of energy diversification. The basic principle here is that even as some of the sources of energy become more expensive or unstable (e.g. fossil fuels, wind and solar energy), other forms of energy (e.g. nuclear energy and hydropower) remain relatively stable in cost and offer a hedge against inflation and fluctuations. This is why investors in other markets, like the stock market, often consider taking exposure to energy stocks, in general.

Take Your Time

As we have discussed, the cost of solar energy has been declining and this has made it more affordable for consumers. However, this also means that the solar energy industry now operates on a larger scale, which presents additional challenges for potential investors.

The risk of investing in a newly emerging market like solar energy is that you may not be able to find reliable information and data regarding the current state of affairs. It is also not a good idea to jump into the market without thoroughly understanding the risks and the benefits of this particular investment. Many advisors and experts suggest that you take at least a year or two to fully assess the situation before committing to a potential solar energy investment.

Bottom Line

Overall, solar energy has gotten a bad rap over the past few years. The cost has declined and this has made it more affordable for consumers. However, this has also brought with it additional risks and complexities for investors. If you are looking for an investment opportunity in renewable energy, you may want to consider the many benefits that solar energy has to offer. But if you are looking for quick profits, solar is not the place to be. The key is to find a good balance between the two and for now, at least, that looks like a fairly easy task.

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