What’s Behind The Fall of Solar Energy Stocks?
Stocks all over the solar industry have been hammered in 2015. Solar panel makers, project developers, and everyone in between have seen stocks crumble this year. What’s going on with solar stocks, and is now the time to buy?
Why solar stocks have crumbled this year
A number of factors are working against the solar industry this year. Oil prices have remained stubbornly low, which, despite the fact that they’re not direct competitors, has affected solar stocks.
The threat of higher interest rates, which would lead to lower returns for solar projects, has also threatened companies’ potential for expansion. Debt investors have demanded higher rates of return from SunEdison (NYSE:SUNE) and SolarCity (NASDAQ:SCTY), two of the most active solar companies in the debt markets, and that has to be a little concerning for the industry.
A third risk that investors are starting to realize is that utilities are starting to learn how to fight third party solar and instead develop it themselves. Challenges to net metering in Arizona, Nevada, and California threaten the enormous growth in solar over the past few years, and companies banking their futures on those states — like SolarCity, which has 75% of its customers in just five states — could be in for a rude awakening.
Reality sets in for solar investors
The other thing that investors are realizing is that many solar companies are in need of billions of dollars in funding just to live up to their growth potential. SolarCity and SunEdison, in particular, are issuing billions of dollars of debt to build projects. This leaves them highly exposed to rising interest rates and the potential that investors will cut off funding in the future. The solar industry may be growing like a weed, but it takes capital to put those projects in the ground.