The past few months have been kind to solar energy stock investors, with many of the industry’s biggest names rising 50% or more. There haven’t been significant changes in the industry yet, but there’s speculation that brighter days are ahead.
The residential solar industry has been particularly hot with Enphase Energy (NASDAQ:ENPH), SunPower (NASDAQ:SPWR), SolarEdge Technologies (NASDAQ:SEDG), and Sunrun (NASDAQ:RUN) all moving sharply higher. But First Solar (NASDAQ:FSLR) is rising as well, and this may simply be a tide that lifts all solar boats in 2021. And there’s good reason to think that the increase in stock prices could last.
SPWR data by YCharts
Energy is up
One big help is that energy commodities are up quite a bit in 2021 and show no sign of stopping. Fossil fuel consumption is back to pre-pandemic levels in most cases, and suppliers simply can’t keep up. Companies from coal to oil and gas cut back spending during the pandemic, which reduced output just as demand returned. The result is the sharp rise in prices that you see below.
Henry Hub Natural Gas Spot Price data by YCharts
When will high energy prices subside? There’s no clear answer. Energy producers don’t seem particularly interested in investing heavily in increasing supply now that they’re swimming in profits again. And a strong economy means consumers have the money to spend on energy to drive and heat their homes without cutting down consumption.
High energy prices seem to be here to stay for a while, and that means that alternatives like solar energy should get more investment.
Subsidies are coming
Just as solar is growing on the back of being cost-competitive with fossil fuels, there could be subsidies on the way. The most recent infrastructure package making its way through Congress includes $320 million for clean energy and electric vehicles, which should give the industry a boost.
Subsidies have always been a key to solar industry growth, but at a time when competing energy costs are already high, they could be a further boon for the industry. Whether you’re a homeowner or utility, it’s hard to see how increased subsidies wouldn’t make solar energy a no-brainer.
Image source: Getty Images.
The biggest fear in solar is subsiding
At the end of the day, oil and gas prices and subsidies have less of an impact on the solar industry than interest rates. Solar projects produce energy for 20 years or more, and they’re normally financed for a long period of time as well. Rising interest rates mean future cash flows are less valuable, making a …….
Source: https://www.fool.com/investing/2021/11/02/why-solar-energy-stocks-are-suddenly-hot-again/
