Why Investing in Solar Energy Is Attracting the Big Boys

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Besides its environmental advantages, solar power has always had one great benefit: It's hyper local. Solar panels make it possible to generate electricity on-site, precisely where it's needed. Like a portable generator powered by the sun, solar energy promises power wherever the sun shines.

What began as backup to more conventional grid-networked sources of power has quickly blossomed into a separate profit center.

And a blockbuster acquisition announced earlier this month is about to make investing in solar energy a lot more appealing....

The Profits in "Off the Grid" Power

Investing in Solar Energy
The demand to produce electricity on-site, whether in residential or commercial settings, has been steadily rising. It began as a strategy to provide power as a supplement to the electricity available from the grid.

But the big money is in self-contained systems that provide both back-up and stand-alone power.

These systems are sprouting up in parking lots and other outdoor spaces, as well as on rooftops. Many smaller companies have joined the rush to provide localized service to homeowners and businesses who want to get "extra" energy from the sun.

To be sure, there have been some hiccups along the way.

Several publicly traded companies have emerged to provide self-contained electricity generation, but the return on investment has been inconsistent at best. So has the adoption of these systems. But as independent solar power generators become more popular, engineers and architects will incorporate solar power into their construction plans.

There's no question that this technology provides operational cost savings, reliability, and energy security. That's nothing new.

In fact, my wife Marina and I have such services at our homes in Ft. Lauderdale and the Bahamas. The latter has proven very useful, given the frequent weather-related power interruptions in the islands.

And this type of localized energy isn't confined to solar. Right now, power sources run the gamut from natural gas to biomass to nuclear.

The Promise of New Forms of Energy

But it's the move into the following two new areas of energy generation, one of which was signaled by the acquisition I mentioned earlier, that's really exciting.

The first involves tapping new ways of power generation, such as the movement of ocean waves. One approach even puts units by the side of the road to use the kinetic energy from passing cars and trucks!

The second is new strategies that overcome some of the current shortcomings of solar energy.

Now, solar technology has come a long way since the early days of the industry: Solar energy no longer requires tying up several square miles of ground with photovoltaic cells, or using expensive inverters to convert DC to AC.

But now, solar energy can go way beyond rooftop panels and solar hot water heaters into an area that has huge potential for growth and profitability.

Portable energy generation.

Because portable energy generation is a cutting-edge technology, most of the players are very small companies. Their tiny size means they have little leverage as a private company or a very small market cap if publicly traded. Either way, these small companies are very vulnerable to market conditions and have little room for error.

Permanent solutions to energy problems require bigger players capable of making long-term financial commitments to developing and commercializing new technology. Those aren't always easy to find. It wasn't long ago that the big boys in the utilities business would acquire new technology merely to bury it and reduce competition. But that game has changed.

How NRG Energy Acquisition Will Give Investing in Solar Energy a Boost

In fact, that's what makes the recent announcement so encouraging. NRG Energy Inc. (NYSE: NRG), the largest independent power provider in the United States, has acquired Goal Zero. Goal Zero produces portable solar generators and chargers for industrial and residential use, and the generators can be "chained" together to provide as much power as needed almost anywhere the sun shines.

Goal Zero is a good example of the small participants that have come up with some potentially big breakthroughs. The private company, still essentially a start-up, has about 100 employees and realized about $35 million in sales last year. It was even included in Forbes' Most Promising Companies list.

A Goal Zero spokesperson told Greentech Media recently that the company has grown "nearly 17,000% in three years from 2009 to 2012." That's astonishing growth.

The company's line of solar generators uses a solar panel combined with a lead acid battery (other lines use lithium-ion and rechargeable NiMC). The biggest one, a 103-pound power pack, tops out at 1,250 watt hours and can put out 1,500 watts peak. Again, multiple units can be interconnected for more power. All products are designed in the company's Utah headquarters and built in China.

The intention is to sell NRG's solar rooftop panels to Goal Zero customers and to sell Goal Zero portable systems to NRG's customers. This "cross-marketing" opens up new opportunities for both companies. But doing that requires much more capital than Goal Zero could provide on its own.

That's where NRG comes in. NRG is already well-positioned in providing renewable power to go along with its full complement of natural gas, nuclear, and coal-fueled generators. NRG is also restructuring itself into three business units - NRG Business, NRG Home, and NRG Renew - to compete in three different arenas, NRG Business will cover the company's conventional generation portfolio in the wholesale markets.

NRG Renew will handle utility-scale renewable energy projects.

And NRG Home will manage the retail business and its three million customers, including rooftop solar installation, home energy management, and electric vehicle charging.

It's NRG Home that will incorporate Goal Zero, providing the envelope-pushing upstart with some heavy capital and market backing.

This corporate marriage may well transform both the portable and renewable energy industries and become the catalyst for major expansion.

Don't be surprised if other big boys become "big brothers" in the sector.

PS. Meanwhile, in another energy sector, I recently delivered an urgent briefing on how the chaos in the Middle East is about to "go global." To get the full report, including what it means for your money, just go here.

About the Author

Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle

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