Oil prices have fallen by about 40% since mid-June, while solar stocks have fallen about 20% in that time.
This is not new, solar stock prices have reacted to rising or falling oil prices in the past. Investors fear cheap oil will bring down demand for alternative energy.
But in reality, those fears are completely unfounded. Here are a few things to consider:
- Solar energy and energy from oil are used in very different ways: Oil is used mainly for transportation fuels, while solar power gives us electricity to power, for example, our machines and electronic devices, and to provide lighting in our homes and businesses.
- As the costs of solar energy production go down, it becomes a better choice as an alternative to other types of electricity generation– which means better returns on investment (ROI) in the long term.
- Public utilities and big businesses are increasingly turning to solar to feed our massive need for electricity. The agreements that they sign with solar providers often span decades and are therefore unaffected by oil price changes.
- As an economic and jobs driver, the clean energy sector – which encompasses hydro power, as well as wind, solar and biomass – is a much better long term bet. In that sector, employment is up 37 per cent to 23,700 people over 5 years in Ontario, B.C. and Quebec. That compares with 22,340 employed in the oilsands. (Solar ‘farms’ are even being planned in oil rich Alberta, where sunlight is intense and plentiful.) Wind, solar, run-of-river, and biomass energy has grown by 93 per cent since 2009.
The bottom line for investors? Solar is here to stay and the future for solar ROI keeps getting brighter (so to speak).