Want Big Bucks? Invest in Solar

Solar technology is turning into an attractive business proposition as large investors begin to see the long-term higher returns of putting money into these projects.

Rapidly falling costs of solar panels and returns of close to 15 percent, projected by the Stanford University’s center for energy policy and finance, make the sector more profitable than ever. Returns beat those from treasure securities and infrastructure and combine the advantages of both, as they are long-term as well as tangible.

Warren Buffett’s Berkshire Hathaway (NYSE:BRK), Google (NASDAQ:GOOG), MetLife (NYSE:MET), and John Hancock Life Insurance (NYSE:MFC) together invested more than $500 million in renewable energy in the last year, according to a Bloomberg report.

“A solar power project with a long-term sales agreement could be viewed as a machine that generates revenue,” Marty Klepper, who works for the firm that helped Berkshire make a solar deal, told Bloomberg. “It’s an attractive investment for any firm, not just those in energy.”

Until about three years ago, even banks would be wary of investing billions of dollars in projects that would not guarantee any revenues for years, but that is changing fast.

“After tax, you’re looking at returns in the 10 percent to 15 percent range,” Stanford University’s Dan Reicher told Bloomberg. “The beauty of solar is once you make the capital investment, you’ve got free fuel and very low operating costs.”

Last month, MetLife spent $2.2 billion on buying a stake in a Texas photovoltaic project and Google spent $94 million in December on four California solar farms. Walmart (NYSE:WMT) is a big buyer of electricity from renewable sources and may soon invest in projects of its own, the report added.

Governments remain the biggest investors. The U.S. Treasury’s Federal Financing Bank was the biggest renewable energy lender last year, bringing in $11.2 billion of funding. The Brazilian development bank BNDES, Bank of America (NYSE:BAC), and Banco Santander (NYSE:STD) were also among the bigger investors.

To contact the reporter on this story: Aabha Rathee at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com