Alternative energy investments which are most likely to bring you money

Alternative energy industry has been developing very fast. Wind and solar energy have the biggest part of contribution in the change of the world’s energy order. As this area of industry is gaining more power and importance and is continuously developing, investors may see it as a huge opportunity for profits. Unfortunately, the last 10 years showed that investing in alternative energy is not so obviously a gold mine. Bad experiences have burst investors’ bubble and justifiably, made them more skeptical and prudent in investing decisions. For those who need some help in deciding, we present suggestions made by three analysts: Travis Hoium, Jason Hall and Adam Galas. Where should we look for the satisfying return?

Investment as bright as the sun

Travis Hoium focuses on the solar energy. He believes that it has the power to bring the total change of world’s energy use, since it is cheaper than fossil fuels and easily available for everyone. He emphasizes its huge value and great potential. It has not been easy to make money on sun power – bankruptcies of solar companies are quite common, and the risk is really repelling. Luckily, the dark solar energy period is coming to an end. Nowadays, solar industry is entering a phase of consolidation. The industry is becoming safer and more stable. The main players finally emerged from the time of competition between companies. This ends the phase of tests and trials and brings some stability and continuous growth. Hoium mentions First Solar and SunPower as the companies which are worth the investors’ attention in the first place.

The wind of change

Jason Hall proposes turning to wind power. This kind of alternative energy investments has not been popular. The giants such as General Electric or Siemens seem to have dominated the manufacturing area of the industry and there are no utility investments in wind power on offer. However, Hall suggests taking a good look at Vestas Wind Systems – a company producing wind turbines. As he observes, the company has recently recovered from previous slight fall and now their situation is very promising.

Favorable combination

Adam Galas suggests buying the two best yieldcos: 8point3 Energy Partners and Brookfield Renewable Energy Partners. The first one is sponsored by the two leader companies in the solar energy industry (First Solar and SunPower). This option is very likely to generate satisfying profits. Investors receive money from the yieldco which earns it from projects realized by First Solar and SunPower. The contracts for the projects are long-term and fixed-price, thus, the risk of loss is lower. When it comes to Brookfield Renewable Energy Partners, Galas believes that this investment in hydroelectric and wind is highly beneficial. It may bring 12-15% of return per year to investors. Contracts providing 92% of their money, are adjusted to inflation, fees are fixed and the average life of them is 17 years, which makes this option of investment recommendable.

The last word

Alternative energy industry is the promising ground for investors. However, the level of risk still remains very high. That is why, investors need to know how to invest right. Generally, to decrease the risk look for the strong and settled leaders among the companies and focus on them.

Environmentally friendly companies

Companies such as Wal-Mar, Target, IKEA and Tesco have turned to the environmental sustainability. They have started a new “green” policy and are meeting the sustainability goals they have set. Many other giants of the world market are following them – Nestle, Procter & Gamble, Coca-Cola, PepsiCo, Kraft, Johnson & Johnson, and Unilever have also expressed their willingness to turn to the green attitude and start building up a plan for new energy use to become environmentally friendly.

Ecological responsibility

Despite of a variety of ecological strategies implemented by the companies, there is one common element present in all of them – green energy. Its significance comes from its power to influence the companies in important economic, environmental and social areas. Economical aspect concerns the matter of fossil fuels costs which are at lower risk because of conserving energy. Apart from this, many customers have become loyal to eco-friendly companies, thus, being green repays. Environmentally, it is reducing the emission of greenhouse gasses which must become the main concern. In terms of the social area, companies need to consider how their activity will affect the community.

Greenhouse gases emission by United States

Reduce energy consumption

Saving energy is a starting point for all sustainability strategies. Energy efficiency projects bring good profits in a short period of time. Companies, like Tesco or AT&T, admit that implementing such projects helped them save a great amount of money. Nonetheless, the profitable energy efficiency programs alone do not meet the goal of sustainability, they need to be mixed with the less beneficial renewable energy projects.

Energy projects demand a great capital and lots of investments in the beginning. On the other hand, companies need projects with limited initial capital and the usage of internal resources at the minimum level. Hence, the energy projects vary in degrees of commitment. These are:

  • Ownership. This option involves a big investment. When it comes to return, it is 8-10 percent over 20 years of the project which is not highly profitable for the average retailer. But it has other advantages. These are: ability to obtain internal expertise, control over production and development and independence from the conventional energy and the green energy providers.
  • Contracting. Here, the matter of project design, financing, construction and operation remain on the developer’s side. Choosing this option purchase of energy can be cheaper, even below market prices. Its disadvantage can be the contracting firm’s inability to obtain a green expertise.
  • Power Purchase Agreements. Such an agreement is made with a developer or utility for 10-20 years. It assumes a purchase of green power at a fixed price. No resources or capital are required, yet it involves a long-term commitment and does not give a possibility to develop internal expertise.
  • Certification. Renewable energy certificates are the least profitable way of green commitment. Companies declare turning to green by purchasing a commitment incremental to their current costs of energy.

3 useful final suggestions

  1. Find a developing or financing partner.
  2. Find the best solution for you. Do not focus on cross-subsidizing energy efficiency and renewable energy profits, but look through different options and then decide which is most profitable for you.
  3. Do not assume that sustainability means low profits. The potential returns can be lower than the industry average, but good management and finding an appropriate partner in the energy supply market can solve this problem.

How can you invest in renewable energy?

There are many ways of investing in renewable energy. Some of them are more risky and the others are safer. As usual, the risky options can bring more profit – sometimes faster, sometimes you must wait – the safer ones demand a longer period of your patience before you start earning. We list the different ways starting from the most sheltered position to the least. Before making the final decision, cogitate about two aspects: whether you are a daredevil or not really, and what your investment prospects are.

You seek the safest possible options

Both companies and individual investors can invest directly, even in small amounts.

Consider:

  • Joinmosaic.com – a crowdsourcing startup enabling you to get into a solar project, investigated by Mosaic team. The interest rates are set between 4.5-6 percent for 5-6 year of obligation period.
  • Bonds: It is a good way of investing for people who prefer safer options. Now, there are $9 billion of bond available for investors, and the number is going to increase.

Higher risk, higher profit

Another strategy is to buy stock in a company. This option has become safer after the creation of ETFs (exchange-traded funds).

Consider:

  • TAN – the Guggenheim solar industry. You can invest in a fast developing solar energy use with great prospects for the future.
  • PBW – it is The PowerShares WilderHill Clean Energy Fund – a renewable energy industry which also shows optimistic prospects for growth in the future.
  • LIT – connected with mining and production of lithium. By investing in LIT you invest in the future of the electric cars. After some noted falls there is probably time for their advancement.

Even higher risk, still higher profit

This option is for more patient risk-takers. You buy individual stocks in a renewable energy company and you either become stressed out because of the unstable stock prices fluctuating in short periods of time or choose the companies which handle not only renewables and your situation becomes more stable.

Check out:

  • GE – the company believing in the wind power. GE Wind- owned by GE, is the American leader of wind turbines production.
  • Siemens – this German firm invests a lot in wind and solar power.
  • GM – an American auto company producing electric cars. Invest if you believe in this industry.

Risk goes up

You can also buy individual stocks of renewables or electric cars centred companies which offer very high returns in the long run:

  • Tesla Motors – a very fast-developing company producing electric cars, with a great potential.
  • PG&E – a utility company from California, American ownership leader in renewables. It offers good safe returns and a dividend.
  • Solar City – the US largest solar installer, with 32 % of the residential installations market’s share.
  • Cree – a generator of energy-efficient items.

For daredevils who want the most

People who believe in their personal entrepreneur abilities can try creating their own renewable energy venture. Taking the solar power into consideration, to bring 1-3 megawatt project to life you will need at least $50,000 at start – it will cover all the needed documents as well. If you manage well, your profits can be really high.