In 2018, the market value of the solar industry was $16.9 billion.
But what exactly is the difference between solar companies in the U.S.? Let’s take a closer look.
The largest company in the U.S. solar industry is also one of the largest companies in the world. It is the international media group, Red Ventures, with $16.9 billion in annual revenue. More than 90% of Red Ventures’ revenue comes from international advertising and sponsorships. The remaining 10% comes from North America. But what does that mean?
It means that the largest U.S. solar company, SunPower, with $13.9 billion in annual revenue, gets a significant part of its revenue from outside of the U.S. In fact, the company gets 75% of its revenue from international operations. That’s a lot of dependency on a small market, which the company is currently fighting to keep alive.
Revenue Vs. Profit
While the market value of the solar industry was up 22% year over year in 2018, the revenue and profit figures tell a different story. In fact, the industry as a whole lost $2.8 billion in net income last year, according to the Solar Energy Industry Association (SEIA). But this was mainly due to two factors. First, the global market for solar power grew by 23% in 2018, to 445 gigawatts (GW). Second, the average price per kilowatt hour (kWh) of solar power jumped up 38% in 2018, to $16.67.
When you add those two factors together, it’s obvious why the industry overall lost money last year. At the same time, the market value of solar companies increased by 22% in 2018, to $16.9 billion. This is mainly because investors see a lot of growth potential in the industry, based on its increasing demand and lower costs.
What’s important for investors is the location of a company’s operations. While most solar companies have their headquarters in America, they generate far more revenue from outside of the U.S. In fact, 72% of solar companies’ total revenue comes from outside of the U.S., according to SEIA. This is probably because a lot of the world’s population still doesn’t have access to electricity, and so there’s a lot of demand for solar power overseas.
The top three countries by revenue for solar companies are China, Germany, and the U.S. And globally, the clean energy industry will soon reach a quarter of a trillion dollars in revenue.
Riches Vs. Responsibility
Some investors in the solar industry are simply looking for quick returns on their investment. That’s why they’re more interested in the size and profitability of a company, rather than how responsibly they operate or what they do for the environment. But it’s not all about money, as much as it might seem. Companies like SunPower and First Solar operate in a very responsible manner, and have put in place strong programs to make sure their suppliers and employees are also treated well.
And even though they’re large corporations, the majority of their employees are still solar workers, and many of them are in unions, which have strong community ties. Investors shouldn’t forget about these factors when considering companies like SunPower and First Solar.
Regulations can also play a big part in the profitability of a company. When President Donald Trump announced the Unite States’ withdrawal from the Paris climate agreement in June 2017, he made a lot of news headlines. In particular, he mentioned that the U.S. would be putting a stop to all of the government’s “job-killing regulations,” especially the ones that affect the coal industry. This promise has led to the deregulaton of many industries, especially the oil and gas ones. But it’s not just about coal, as the withdrawal of the U.S. from the Paris climate accord also affected the solar industry.
Coal is still the cheapest energy source in the U.S., so it wasn’t hard for solar companies to find new customers. But Trump’s promise to “put a stop to all of the government’s job-killing regulations” also affected solar companies. In the first year after Trump took office, the share prices of most solar companies fell by as much as 40%. But since then, the industry has gotten back on track, with the price per kWh decreasing by 7%.
When it comes to regulations, there are both good and bad ones. Sometimes they protect the environment and the community, but at the same time, they can hinder business growth. That’s why it’s so important to do your research before investing in a company, to make sure that you know exactly what you’re getting into and can evaluate the regulations and laws in the area where the company is located.
With so much information available online, it’s easy to find out everything there is to know about any company. Doing your research doesn’t have to be hard. Investors can simply use a few keywords to find all of the relevant information they need about a company, without having to wade through marketing fluff.
Taking your time to do thorough research will only pay off in the end. There are a lot of wealthy investors out there who are looking to put their money into a business that they know will provide them with a great return. But the key word here is “they.” This means that these investors could be individuals or institution. It doesn’t have to be just one person, or even just one institution, investing in a company. This is where doing your research matters. It will tell you who’s investing in your favorite company, and what their objectives are. This way, you can make sure that you’re not investing in a company that’s already well-funded and has no intentions of keeping its investors happy for very long.
Strategic partnerships are another important aspect of a company’s financials. Essentially, a company will partner with another company to sell a product or service that they both need. As an investor, it’s very important to see what kind of partnership a company is involved in, especially if those partnerships provide the potential for growth.
When evaluating a company’s financials, you should look for any partnerships or joint ventures they are a part of. These types of partnerships are usually between two companies, but can also be between two non-profit organizations or even governmental organizations. The end goal is to create an alliance or a partnership that will benefit both companies.
The most valuable partnerships in the solar industry are those between large corporations and large non-profits. SunPower, for example, has a partnership with the U.S. Department of Energy (DOE) that allows the company to sell and distribute its products to military bases and other government agencies. Through this partnership with the DOE, SunPower is able to sell more solar products and gain access to more customers. This allows the company to maximize revenue and minimize expenses.
But while having a strong partnership with the government or another large corporation can be extremely beneficial, it comes with its share of risks. If the partnership turns sour, it can damage your investment completely, as the two companies could pull in separate directions, or even go head-to-head. In some cases, a partnership can also hurt a company’s image, as customers or the public might see the partnership as a sign of weakness.
Having the money to fund your business is another important aspect of a company’s finances. After all, you can’t grow a business if you don’t have enough money to buy the materials and pay your employees. Thankfully, the vast majority of the largest solar companies got their start with government grants or loans, rather than relying on investment money from external sources.
When it comes to the solar industry, the majority of businesses are still very much in the startup phase, and so banks are very willing to lend them money. This is because while many industries have seen a lot of online activity, the solar industry is still seen as a bit of a gamble by most banks, as there isn’t really a clear path to profit, and it’s not yet established as a stable industry. As a result, fewer banks are willing to lend money to companies in the solar industry.
Government loans and grants are also important for the growth of a nascent industry like solar. Without them, it wouldn’t be possible for many entrepreneurs to fund their ventures. And without competition, entrepreneurs would be forced to accept any price the supplier chooses to offer, rather than finding a fair market price. So while it’s not always the case, government assistance can mean cheaper and more accessible energy for all. This is undoubtedly a good thing for the environment.