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Investing in solar energy with ETFs
Solar ETFs are opening doors to investors seeking sustainable investing options and who want to invest in solar energy to help the environment.
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Although solar energy is the most abundant energy source on earth (source: U.S. DOE), it only makes up a small portion of the world's electrical production. The demand for clean energy has never been greater since climate change threatens the survival of the earth, its species, and its ecosystems. Rising solar technology adoption may be able to lessen the negative environmental effects of fossil fuel consumption and address the world's power insecurity. This article examines how to invest in solar-related businesses, a green theme with promising long-term prospects and a tool for ESG investors to improve the environment.
How does solar energy work?
Solar energy systems either use photovoltaic (PV) panels or mirrors to focus solar radiation on converting sunlight into electrical energy. This power can be converted into electricity, or it can be stored thermally or in batteries.
Behind surpassing bioenergy in 2019, solar PV generated 3.1% of the world's electricity in 2020 (Source: iea.org). It is still the third-largest renewable electricity technology after onshore wind and hydropower. Here is where you can read more about solar power.
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Should you invest in solar energy?
The amount of sunlight reaching the earth's surface in an hour and a half is sufficient to meet all of the world's energy needs for a complete year (Source: energy.gov). This single data demonstrates the enormous worldwide possibility of providing our planet with a plentiful and clean energy source. The following are some crucial considerations for investors regarding solar energy:
- By 2026, the solar energy business might be worth $200 billion, or four times what it was in 2019 (Source: Facts and Factors, 2021)
- With an estimated $3.4 trillion in solar spending through 2040, solar energy offers remarkable development potential (Source: Bloomberg New Energy Finance)
- By 2050, 25% of the world's electricity will be produced by solar PV (Source: BNEF)
With free fuel (sunlight) and no CO2 or other environmental emissions, solar energy is one of the very few long-term solutions for the world's zero-carbon energy requirements. Solar energy is another scalable option that offers both distributed retail electricity for businesses and households as well as wholesale electricity for utilities.
Investing in Solar ETFs
The Invesco Solar ETF (TAN) was the first solar ETF to enter the market. TAN was introduced on April 15th, 2008, and quickly gained popularity among supporters of clean energy. Other ETF issuers introduced new Solar ETFs to meet the needs of an expanding group of Thematic ESG investors when the demand for Clean Energy ETFs peaked during the pandemic.
Solar ETFs domiciled in the United States:
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