Dive Brief:
- Solar stock prices are dropping. Analysts believe it is primarily due to the falling price of oil, despite the fact that oil is a transportation fuel and solar energy generates electricity.
- One contributing factor is an oversupply of solar stocks from company issues to raise capital. Another is concerns that a Federal Reserve interest rate increase could lower the value of solar company yieldcos.
- The good news for solar, however, is that installations are predicted to be up 33% in 2015, utility-scale project contracts are coming in at prices competitive with fossil fuel generation, and the Clean Power Plan is expected to sustain growth far into the 2020s. These fundamentals should sustain solar investments over the long term.
Dive Insight:
The MAC Global Solar Energy index is 36% below its April 2015 high. SunEdison, a vertically integrated solar industry power and a leader among solar investments, has dropped 55% since July 20. SunRun, the third leading U.S. solar installer, made its initial public offering at $14 per share but closed Thursday at just over $10. First Solar is 30% below its 52-week high set in September 2014.
Hood River Capital Management led the SunEdison sell-off on the concern the world’s biggest renewables developer is moving too fast. SunEdison made its third 2015 acquisition in purchasing Vivint Solar, the second biggest U.S. rooftop solar installer.
Investors’ more general concerns about solar are that it is not yet mainstream, still expensive in some places, relies on subsidies, and has seen regulatory pushback.
Yieldcos have been popular recently because they provide stable dividends secured by the utility-scale solar and wind installations with long term contracts that back them. NRG Yield, Abengoa Yield, and Terraform Power have completed secondary offerings in the last year. But if interest rates rise, investors may turn to the even more secure Treasury bonds.
