by Jesse Morris, via Rocky Mountain Institute
Thousands of Americans log in to online trading accounts every day to manage personal stock portfolios. Now, there?s a new option for individual investors. I recently took advantage of this option by creating an account with Solar Mosaic and investing a small amount of money, along with about 85 other individuals, in a 26-kilowatt rooftop solar system in Oakland.
Right now my $25 investment is really an interest-free loan, since historically companies like Solar Mosaic haven?t been able to offer financial returns on their products. However, thanks to passage of the JOBS Act last month, Solar Mosaic and similar companies will be able to offer returns on investments for ?crowdfunded? projects. So in addition to buying pure stock in a publicly traded company, I?ll soon be able to use websites like Solar Mosaic?s to build a portfolio of solar investments that provide a return on investment with every kilowatt-hour of solar energy produced.
Much has been written about the JOBS Act and its impending effect on crowdfunding, entrepreneurs seeking capital, and emerging growth companies like Kickstarter. But for me, crowdfunding?s new legal status and ability to raise capital for renewable energy projects is indicative of a broader theme: retail investors?that?s you and me, as opposed to institutional investors like banks and funds?now have access to, by my count, five primary, different ways to make real money by personally investing in solar.
When I say ?invest,? I mean it. Generally speaking, when folks think about investing in solar energy, they think about spending a bunch of money for a system on a home or business that will offset some electricity costs and pay for itself in savings at some point twenty years down the road. But solar costs have come down, and the industry is rapidly maturing. So now, when we invest in solar, we are no longer just doing the right thing and paying a solar premium. In many cases we can attach a required return to every dollar spent.
Let?s look at these five kinds of solar-focused investments that we can currently make as retail investors (if I?ve left any big categories off, please start a discussion in the comment section below!):
1. Crowdfunded Solar
2. Direct Ownership
3. Third-Party Finance
4. Community Solar Gardens
5. Direct Stock Purchase
With these investment channels open to individual investors of all shapes and sizes, there?s a lot of moneymaking potential?especially over the next decade. A recent report by McKinsey & Company predicts that global installed capacity could increase to anywhere between 400 and 600 gigawatts (GW) by 2020, up from 65 GW globally today (Five GW of solar panels roughly match the electrical generation of a large nuclear power plant).
For market growth to occur on this scale and for RMI?s long-term vision of a U.S. electricity system based on efficiency and renewables to become reality, several things must happen in the renewable energy space?including more open access to additional capital markets capable of supporting a ten-fold expansion in installed solar capacity between now and 2020.
But even with these challenges in mind, the current and emerging diversity of investment options available to retail investors are promising signs for the renewable energy industry as a whole.
Jesse Morris is an analyst with the Rocky Mountain Institute. This piece was originally published at RMI’s blog and was re-printed with permission.