The best renewable energy investment

When you read a headline such as one from CNBC touting “Solar power’s stunning growth,” realize that it’s thanks to you—even if you’ve never even thought of putting solar panels on your roof or live in an apartment where you couldn’t install them if you wanted to. If you live in the United States, vote, pay taxes, and get your electricity from a utility company, you’ve helped the solar power industry. You support the solar industry through a variety of tax and regulatory policies—voted in by politicians you elected—that favor it over other lower-cost forms of electricity generation.

The CNBC story from December 2014 that claims: “US generation up 100 percent this year,” acknowledges the reality of my postulation. “Four major factors have made the solar surge possible,” it states. It, then, goes on to list them: (Only one is the result of market conditions, with the other three relating to government policy.)

The extension of the Investment Tax Credit for renewable energy;
State renewable portfolio standards;
The Obama administration’s pro-solar policies, including friendly environmental reviews, cash grants in lieu of tax credits and guaranteed loans; and
The steep decline in the price of PV.

With such favorable conditions, solar may seem like a fail-safe investment—which is exactly what Sunrun is hoping for with its new initial public offering (IPO), expected to raise about $100 million. After all, the Wall Street Journal’s (WSJ) reporting on the Sunrun IPO points to SolarCity’s success: “shares have soared more than sixfold since its 2012 IPO.”

However, before investing, it would be wise to consider the changeable nature of politics. Tim Snyder, President of Agri-Energy Solutions, Inc. told me: “I spent years developing ethanol and biodiesel opportunities. That was in a time when everyone wanted to invest in them. When times were good you could expect payback of your initial investment in less than two years with sky rocketing internal rates of return. All it took to kill investor interest for these projects was for the government to turn its back on the standard corn-based ethanol plant.”

Snyder added: “The countryside is littered with the carcasses of investors who thought they were investing in the new energy wave for the future, in ethanol and biodiesel, only to have their hopes and cash robbed by a very conflicted energy policy. It’s just not a safe place to put your money without a real and comprehensive plan and the federal government has no such plan. Remember the old saying, ‘The government giveth and the government taketh away.’”

Sunrun, as WSJ summarizes, “installs solar panels on residential homes either for no upfront cost or at low cost. Sunrun owns the solar panels and receives monthly payments from homeowners for the power generated by the panels. It also receives government tax incentives to cover its costs.”