Matt Insley: “If It’s Sunny, WE’RE Makin’ Money”

The Solar Sector Is Heating up. Here’s the Proof…

George Soros, Steve Cohen, Israel Englander, Leon Cooperman, Michael Platt, Daniel Loeb, James Dinan, Stephen Mandel Jr., Larry Robbins and David Einhorn…

That’s a list of billionaire fund managers that have a stake in the solar sector.

Indeed, the solar sector is continuing to warm up with big money…

Warren Buffett earmarked $15 billion for renewables (with a keen eye on solar) — and he said he’d double that investment if he had the opportunity.

Elon Musk, the maverick businessman and big thinker behind Tesla and SpaceX, has over $1.1 billion invested.

Truly, we’ve got a chair pulled up to the high-roller table — these aren’t small bets, to be sure. Whale investors are plunking big money down on solar.

But why the heck would these big bucks be flowing to a solar industry that over the past decade has been known for inefficiencies, bad economics and fraud?

Today, I want to show you the math that proves the tide has turned on solar. The opportunity that is staring us in the face today is akin to any other big energy opportunity I’ve seen…

Back in 2009, no one believed the shale oil industry was economic — BUT it was the smart money that did the talking. Soon it was clear American drillers could make a hefty return on those wells that everyone thought were “uneconomic.”

The rest was history. We saw several years of huge profit opportunities as the shale boom took off.

We’re seeing the same thing stack up with today’s solar industry.

There are a lot of naysayers out there. But the smart money is making its move. Better yet, a look underneath the hood shows that solar is no longer a charity case.

Today, I’ll show you the numbers and you can decide for yourself. Let’s put on our sunscreen and get started…

“Plug Into the Sun”

A few weeks ago, I scorched my boots on the roof of a local solar install.

As you know, besides staying up on the news and crunching my own numbers, I like to get up close and personal with what’s happening in the field.

I went to check out a midsized commercial solar project near our Baltimore office; 14.2 miles and 98 degrees later, I was up on a roof…

Ninety-eight degrees? Let’s head up to the roof!

The project was impressive. A big office building with a roof the size of, say, a football field.

Altogether, there were 728 solar panels installed, with the potential to deliver a total of 225 kilowatts of power.

A 225 kW commercial solar project outside of Baltimore

The power runs through a bank of inverters and then connects directly into the grid through a “net meter.” Not to be confused with a “smart meter” on your house, a “net meter” is what keeps track of which way the electrons are flowing — so customers can get “paid” for the solar electricity they generate.

The company’s motto is “Plug Into the Sun” — makes sense to me! From what I heard on-site, business is booming, too. Besides commercial projects like this, residential projects are popping up everywhere.

Simply put, today’s solar industry is booming. It’s making money for small private companies like the one I visited in Maryland as well as the big names.

If it’s sunny, they’re makin’ money!

OK, I admit I haven’t told you anything new so far.

I’m sure you knew you could put solar panels on a roof (duh!)…

And I’m sure you knew that you get “credit” for the solar power generated (duh!)…

There’s nothing new there, I agree. The urgent part of this story comes down to two new changes in the math…

First, panels are more efficient these days. Today’s photovoltaic, or “PV,” cells are much more efficient and have the ability to produce much more power than cells from decades past.

Second, panels and installation costs are cheaper than they’ve ever been — and prices are dropping VERY rapidly.

When you add up those two simple stats, you get to a seemingly unbelievable conclusion: Solar has the potential to be wildly economic.

From my calculation, using numbers from Deutsche Bank and the U.S. EIA — and confirmed by the folks I’ve talked to in the industry — these solar panels can “break even,” or pay for themselves, in seven–eight years. And they’ll last anywhere from 20–30 years.

That’s pretty good, right?

But it gets better…

First, that doesn’t include the 30% tax credit you can grab by installing them — along with any local or state credits. When you add that into the equation, the panels pay for themselves in a little over five years.

But it gets better still…

Costs of panels and installs are still dropping. By 2017, if the government tax credit is renewed, we could be looking at a payoff in under four years.

See the math there? You pay for four years and then you get as much as 26 years of “free” energy. Said another way, these panels are showing a return on investment of anywhere from 4-to-1 to 6-to-1…

Solar isn’t the inefficient government boondoggle EVERYONE thinks it is. The crowd is wrong here.

Knowing that simple fact can make us a lot of money, too.

Here’s Where We’ll Make Our Money…

The solar company I spoke with is a local independent company — and their customers pay outright for the solar panels to be installed. If the job is $20,000, the homeowner pays that out of pocket. And the homeowner owns the solar panels and reaps the benefits for 20–30 years. The homeowner can also take advantage of federal and state tax credits (30%-plus).

This isn’t the case with some “Big Solar” companies in the marketplace. Big Solar companies are utilizing third-party leasing, where they own the solar panels and lease them to customers.

This is really heating things up….

“Big Solar” companies are kicking this opportunity into high gear. And as you’d expect from any smart power company, they’ve got the economics well in their favor.

In some cases, these Big Solar companies are locking customers into long-term power purchase agreements (PPAs). Through these deals, the solar company will completely pay for the panel installation, with no cost to the customer. Then the customer gets a lowered energy bill for a set time.

How much lower is the bill? Ha! I’m sure the solar power company is controlling those numbers (in their favor). And in some instances, I’ve heard the savings could almost fully disappear within a few years.

Along with that, the savvy Big Solar companies are also taking the renewable tax credits.

So when you add it all up, these companies are in a very favorable position. What the Big Solar companies are doing is “brilliant, really” one of the guys mentioned on-site.

So What’s Next?

Well, the way I see it, there’s a solar land grab going on right in front of our eyes. Company reps are canvassing neighborhoods across America. Big companies are signing long-term deals with big-box retailers like Wal-Mart and Staples, too.

This land rush is going to end well for the companies that scoop up the most solar “acreage” and make the most lucrative binding contracts.

Just like in the early days of an oil boom, the smart money is starting to place their bets. Investors like Soros, Einhorn and Buffett are getting in early… and now’s the time for you to join them.

Keep your boots muddy,

Matt Insley

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