Solar Stocks Under Pressure: Future Outlook for Investors

The solar sector has gained significant importance in recent years thanks to low costs and government incentives. Despite the trend towards renewable energy, the industry experienced an unexpected setback in 2023. High interest rates made capital procurement difficult, resulting in over 100 bankruptcies and significantly impairing economic conditions—especially in California, one of the largest solar markets in the USA. The new net energy metering (NEM 3.0) rules in California, which prevent customers from accumulating credits beyond their annual consumption, have drastically reduced the profitability of solar systems. These policy changes led to an 80% drop in installation volumes. Despite growing demand for clean energy, the performance of solar stocks has underperformed compared to the S&P 500, falling an average of 30%. High interest rates and political adjustments are major factors contributing to bankruptcies and growth issues in the industry. Nevertheless, the long-term outlook remains positive: the anticipated decline in interest rates could boost the growth of solar companies by providing more favorable financing conditions and increasing consumer demand. Currently, solar energy accounts for less than 4% of total electricity generation in the USA, offering significant growth potential for the solar industry. Forecasts indicate that solar power generation will grow by 75% to 286 billion kWh by 2025. This development is supported by increased demand and technological advancements that enhance the efficiency of solar panels. Not only lower costs but also technological advancements make solar energy attractive. Modern panels now achieve conversion efficiencies of over 25%, compared to previous values of only 10%. This makes them a preferred choice for households and businesses. The growth of the US solar market is estimated at an annual growth rate of 16.48% until 2028. This is fostered by falling costs for solar panels and supportive government policies. However, not only the USA, but also China poses massive competition, as the country has now installed more solar panels than the USA has in its entire history. To safeguard against cheap imports from China, the USA has introduced subsidies and increased tariffs on solar cells from 25% to 50%. At the same time, microinverters are playing an increasingly important role by improving the efficiency and flexibility of solar systems. Demand for these components is projected to reach an annual growth rate of 18.1%. Major technology companies are driving demand for clean energy to power their data centers. With the expansion of artificial intelligence, energy demand is rising significantly, promoting investments in clean energy. While the share of solar energy in new electricity generation is projected to rise to 58% by 2024, there are numerous investment opportunities. One of the promising stocks is Sunrun Inc., which has established itself as a leading provider of solar systems and storage solutions for the residential sector and boasts an annual growth rate of 26.6%.