Solar power is growing like hardly anything else, in the U.S. and around the world. Solar costs are dropping like crazy and that trend is expected to continue (as it has for decades). But solar stocks are struggling.
To start off, I’ll let you know that am anything but a stock market expert. I don’t play the stock market and I don’t read about it all that often. But there’s a story sort of buzzing through the solar industry and stock market world that is quite odd and has caught my attention.
Apparently, solar stocks have been really struggling this year. OK, you may say, stocks rise and fall and the whole thing is unpredictable. But this is a really odd thing for a few reasons. Let’s take a quick look.
1. Solar power has been growing in leaps and bounds in the U.S. in recent years. It is one of the fastest-growing sectors of the U.S. economy.
2. No, that growth is not expected to slow down. Solar costs have been dropping substantially in recent years and this year as well (they’ve dropped approximately 20% this year!), and they are predicted to keep dropping substantially for years to come… according to everyone as far as I have read. Solar is already cost-competitive with coal in some regions (not even taking important externalities into account) and is expected to be far cheaper than coal in just a few years. That combined with the fact that we have a clear need to switch to cleaner sources of power like solar and the fact that many states and countries have set clear renewable energy targets that pretty much ensure solar will continue growing tremendously make it a no-brainer that solar companies are going to grow as well.
3. Nuclear has clearly gone out of favor (if it ever was in favor) with a ton of people after the crisis in Japan (which is still ongoing). That only makes solar more attractive.
So, looking at all these factors, what gives? Solar energy is popular, costs are dropping, growth has been occurring for years and is projected to continue at a tremendous rate….
Note this comment from a reader — sent to me via Twitter: “On wall street there is a concerted effort to destroy equity in solar stocks. conservative governments mean equals less support.”
Prior to receiving the note above, my guesses were that 1) traders were just anticipating that solar stock prices will drop for awhile before all of these factors make solar blow up (even more than it has been) and become a mainstream consumer product or 2) traders didn’t know how to evaluate the potential of solar companies and with so many out there right now, they are hesitant to try to figure out which to put their money on.
Clearly, without something a little odd going on behind the scenes, the situation doesn’t seem to make sense. “Any way you slice it, the solar industry is currently very undervalued by analysts and traders,” as Garvin Jabusch, cofounder of Green Alpha Advisors, LLC, and manager of The Sierra Club Green Alpha Portfolio, notes.
Article by Zachary Shahan, appearing courtesy Earth & Industry.