With natural gas prices sinking to historical lows and crude oil futures whip-lashing amidst the ongoing geopolitical tensions in the Middle East, many are turning to alternative energy investments in search of lucrative returns [see 25 Ways To Invest In Alternative Energy]. Solar energy in particular, which is often times associated with rampant volatility, has actually caught the attention of many investors in 2012 thanks to impressive performances out of this corner of the market.
Perhaps the biggest criticism of solar energy is the relatively high start-up costs necessary for tapping into the suns’ rays. This alternative energy source pales in comparison from a cost perspective relative to investments in traditional fossil fuels, hydropower, and even wind energy. However, the higher upfront costs may be well worth it over the long-run as solar energy actually creates more jobs per megawatt installed than other energy resource. The fact of the matter is that solar energy creates jobs on the home front because installation and maintenance of panels can’t be outsourced overseas [see The Best Way To Invest In Solar Energy].
With China definitively leading the way in this corner of the alternative energy market, it’s encouraging to see that demand for solar products is expected to increase in the U.S. over the coming years. Aside from the obvious appeal as a renewable source of clean fuel, solar energy is also helping to bring power to corners of the globe which have been left in the dark so to speak. ToughStuff, a Mauritius-based company, is expanding access to low-cost, durable solar panels to low income communities across 10 African countries.
Ways To Play
Investors looking to tap into this lucrative corner of the energy market have a number of options available at their fingertips. The biggest player in the industry is First Solar (FSLR), which boasts a $3.5 billion market cap and has amassed gains of 21% year-to-date alone. China-based Trina Solar (TSL) is another viable option; this manufacturer of solar-power products features a global distribution network and has returned over 45% thus far in 2012 [see also The Ultimate Guide To Solar Power Investing].
Those who wish to take a more diversified approach in accessing the solar sector may wish to instead opt for an exchange-traded product. The Guggenheim Solar ETF (TAN) has close to $100 million in assets under management, offering exposure to 30 leading companies within the solar energy industry. This ETF is up an impressive 35% year-to-date, while the less popular Van Eck Market Vectors Solar Energy ETF (KWT) is up 37% in the same time period.
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Disclosure: No positions at time of writing.