- Posted February 14, 2014 by
This iReport is part of an assignment:
Wintry weather 2014
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Solar Energy is not just for TreeHuggers anymore
Solar Energy is not just for TreeHuggers anymore
By: Todd M. Schoenberger, www.Flexera.net
First of all, let’s address the elephant in the room: I don’t believe in global warming. Never have, never will. I see it as a pure, money making scheme used to drain cash from foolish suckers.
Just like the business of organic foods, people have become emotional over false promises of feeling fulfilled from some worldwide natural phenomenon, only to finally realize they’ve been the victim of some ruse typically found at the Barnum and Bailey circus.
Yes, TreeHuggers: Hate to break the news, but the fad of supporting global warming causes is quickly coming to an end. But what is not ending is the objective of making, and saving, money.
Recently, I was brought on to work for a Delaware-based renewable energy company in need of some long-overdue publicity for its solar business. Flexera, Inc. is one of Delaware’s success stories (there aren’t many these days in the First State, you know), but very few outside of the state have ever heard of the company.
So, enter stage left…yours truly.
But I only agreed to start if I saw value in the industry Flexera was part of; and to my surprise, the solar industry isn’t just booming, it has become the hottest sector Wall Street has seen in a decade.
The industry is on fire as employment is skyrocketing (yes, and higher wage jobs too—more on this one in a bit), and consumers and companies are realizing the economic benefits, thus pushing sales to record highs as demand continues to exceed expectations.
Forget the “save the earth” nonsense…this is a “save the bottom line” message.
U.S. businesses, non-profits, and government organizations blanketed their rooftops and properties with over 1,000 megawatts of new solar installations through the first six months of 2013, representing a 40 percent year-over-year increase. And one trend is clearly evident: companies that have installed solar continue to add more.
Wal-Mart leads the way with installations, adding 215 systems to its facilities in an effort to reduce energy expenditures. In essence, Wal-Mart is its own solar power plant, and with the BLS’ seasonally adjusted electricity index now at an all-time high, the retail giant is able to allocate resources to their core business operations of offering low-cost products to its customers.
And Wal-Mart isn’t alone. Costco, Kohl’s, Apple and Ikea round out the top five for total solar installs equating to billions of dollars in utility savings and helping these companies better plan for the future.
Oh, that’s right—the thing about jobs. There are now an estimated 142,000 workers active in the solar industry, according to industry advocate, The Solar Foundation. This number is up almost 20 percent since 2012, and 50 percent since 2010. And, due to excessive demand of solar energy systems, 45 percent of the businesses surveyed expect to add more jobs in 2014.
According to Forbes Magazine, at present, the solar industry is a “critical employment generator in the U.S.,” generating one of every 142 new jobs created. Forbes also added that two-thirds of the employment generated is in the relatively labor-intensive installation side of the business, earning an average $23.63 hourly wage.
Ok, so since this is a Wall Street crowd, you want to know how this great story equates to investment profits. Oh baby, you clicked on the right article today.
There are two amazing ETFs focused on the solar industry you need to check out. The first is Guggenheim Solar ETF (NYSE: TAN), which is up an eye-popping 15 percent year-to-date. Its number one holding, SolarCity (NASDAQ: SCTY) has posted…now get this…a gain of 27 percent just this year. (Hello! Calling Mr. Cramer!)
SolarCity has a financing arm, which offers $0 down leases and takes full advantage of state-sponsored grants, is flexing its muscle and accumulating pivotal market share in the residential space. According to Goldman Sachs, the rooftop sector will grow at a CAGR of 45 percent until 2016. This is fantastic news for companies like SolarCity, but also commercial bigwigs like Flexera.
The company also just recently introduced a web-based investment platform to let the public and organizations take part directly in solar investments. So, if you’re looking for more action than an equity or ETF, you can now seek an alternative similar to those offered only to large financial institutions.
The second ETF to keep an eye on is Market Vectors Solar Energy (NYSE: KWT), which has posted a very respectable 10 percent gain thus far this year. This ETF’s largest holding is SunEdison, Inc. (NASDAQ: SUNE), which has posted a solid 12 percent gain, so far, in the 2014 campaign.
SunEdison is spinning off its semiconductor business, which will result is a gain of $40 to $50 million in cash flow, which helps the company offer generous financing options for solar builders. As RBS Capital Markets’ analyst, Mahesh Sanganeria, recently stated, “the planned spin-off indicates that SunEdison has the best strategy to monetize the significant growth expected in solar energy while many others may experience profitless prosperity.”
Stocks like SunEdison and SolarCity are obviously helping the ETFs that trade them, but these companies are also thriving due to overwhelming demand for cost cutting on the household and corporate level. And, as nice as it is to think about the so-called earthly benefits of using renewable energy, investors—and consumers—are the real winners.
The future is obviously bright.
Todd M. Schoenberger is author of the forthcoming “Cyclone of Insanity: A Hedge Fund Manager’s Struggle with Poverty, Elitism and Politics.” Follow on Twitter @TMSchoenberger