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The Sunny Side of Solar: Retail Bonds

It’s going to be a great season for solar energy… if you join the right team.

You see, primetime solar bond investments used to be only for large institutions.

The everyday investor had to play in amateur leagues with equities and private solar panels.

But that’s all about to change.

Now, you have the chance to join the pros and score fast returns, all thanks to a popular solar company.

One Bright Idea

On October 15, SolarCity (SCTY) launched the nation’s first registered public offering of solar bonds.

The bonds provide an opportunity for individuals to access clean energy investments through an online investment site.

SolarCity is the nation’s largest solar services firm and leading installer of rooftop solar systems. The company currently accounts for about one-third of all new solar installations in the United States.

Initially, SolarCity filed a registration statement with the Securities and Exchange Commission to issue up to $200 million in solar bonds.

But the company fully expects to make regular additional offerings and has already raised $575 million through traditional (institutional) bond markets.

The bonds are sold in increments of $1,000 and have maturity periods of one, two, three, and seven years, with interest rates ranging from 2% to 4%.

And as long as you’re a U.S. citizen, at least 18 years old, and have a domestic bank account, you can invest in these bonds, plus there are no fees!

The Benefit of Vitamin D

In today’s zero-interest-rate world, bonds provide a good option for investors who can’t find yield in savings accounts, CDs, or Treasuries.

Better yet, the solar industry has been generating impressive returns that should continue into the future.

Solar Giving Off Real Bang For Brightness: Internal Rate of Return on Residential Solar Energy vs. Broad Market

As you can see, Solar provides a better return than even the stock market. By purchasing SolarCity bonds, you’re investing in a highly lucrative sector.

Payback from investment can be seen in as little as four to six years. Plus, there are many third-party financing and zero-money-down offers available in some states.

But while investors can achieve a higher yield through SolarCity bonds, there’s also a bit more risk…

Break out the SPF

It’s no secret that many investors have been burned by solar investments, and SolarCity bonds are hardly immune to the risks.

First, the new direct-to-consumer bonds are smaller and come with lower rates than the bonds SolarCity sold in the traditional market. The bonds from the traditional market have longer maturities and interest rates up to 4.59%.

Second, demand may not be as strong as SolarCity is hoping.

As you know, there’s still considerable uncertainty surrounding renewable power. In the near future, the industry needs to integrate into the transforming energy infrastructure, including changing the perception of solar as solely a long-term investment.

If you’re still not sold on SolarCity bonds and want to ride the boom, there’s always the option to invest in SolarCity’s equity, which has seen decent gains over time.

But be warned, the stock is well off its February highs right now.

Good investing,

Shelley Goldberg

Shelley Goldberg

, Senior Correspondent

View More By Shelley Goldberg