The solar industry involves more than just installing and maintaining the solar photovoltaic panels on your roof. The industry often includes separate companies that manufacture solar system components and panels, install solar systems, and operate solar energy facilities.

There is a global movement to reduce carbon emissions, and a part of that is moving away from fossil fuels. As a result, more and more individuals, companies, and even countries are pursuing alternative energy solutions.

President Joe Biden has set the goal for the United States to generate 100% carbon-free electricity by 2035. The White House has recently proposed $300 billion in tax cuts for clean energy, including solar power. The administration also plans on investing in new jobs and cutting costs in this sector. These tax credits and investments could see the exponential growth of the solar industry.

This change means that investing in solar power could include more than just installing a solar power system in your home. Solar investors are investing in solar stocks on the stock market. These investments are seen in all areas of the industry, including production, installation, and energy management.

Solar stock prices have seen a drop recently. That is not necessarily bad since the factors influencing the decline of solar stock prices could be offset by the rapid growth of the renewable energy industry on a global scale. It is definitely worth considering investing in clean energy stock.

 

When to invest in Solar stocks?

It is always tricky to decide when to buy stocks, and green energy stocks are no different. In order to see the best return on your investment, you want to buy stocks at the lowest price possible to sell at a higher price in the future. Alternatively, you could purchase stock and benefit from any dividends they deliver. Thus, there is a delicate balance between buying when solar energy stocks are low while doing your due diligence to make sure your investment is set to grow.

Solar stocks are dropping right now. Green energy giants like Canadian Solar and Enphase Energy have seen a decline in their value. This is due to several factors. First, the price of polysilicon (often used to produce solar panels) has increased due to global demand. Solar company Canadian Solar, in particular, has also mentioned that rising transportation costs negatively affect their earnings. Increased costs mean solar companies show less profit, which negatively affects the price of their solar stocks.

Besides the higher polysilicon price, the anticipation of tariffs or trade restrictions for goods coming from China also affects the solar stock price. At present importing solar materials from Xinjiang, China has been banned. More than that, the Chinese government is placing restrictions on many industries, which could affect the solar industry in the U.S. and around the world. This is especially true for companies that rely on products manufactured in China. Large solar companies like Canadian Solar, Maxeon, and JinkoSolar all have operations in China and could feel the implications of this.

Another factor that influences the stock price is the expectation of higher interest rates. Higher interest rates could mean consumers may not be able to purchase renewable energy systems as easily because financing for these products may be less available and lending conditions less favorable. As the interest rate rises, renewable stock prices are likely to drop due to decreased demand. On the other hand, solar stock prices go up as demand increases again when interest rates go down. Having said that, the production and installation of solar systems are becoming less expensive. This could possibly mean that the prices of solar systems could come down in the future, making them more accessible and affordable.

The drop in solar stock prices could cause hesitation in investors. However, one needs to consider the tax incentives and investments that the current administration is dedicating to the clean energy industry. Even though the price of polysilicon has increased, solar energy is still one of the most cost-effective sources of renewable energy. Besides that, some solar companies don’t use polysilicon to manufacture their products.

In addition to that, there is an increase in investment in the solar industry globally. Solar markets in China, Japan, India, and the Middle East are all expanding. A rapidly growing market predicts that solar stock prices are likely to increase in the future.

If you are wondering when the right time is to invest in solar stocks, the answer is ‘now’. Although solar stocks are low, everything is pointing towards industry growth. This is bolstered by the global savings of solar energy compared to other sources of alternative power. On top of that, the global solar energy market size is predicted to reach around 223 billion by 2026. That is up from $52.5 billion in 2018. If you do decide to invest in solar stocks, bear in mind that renewable energy stock prices may still see significant fluctuations for a period. The question is whether to invest in solar stock today or wait a short while to see whether the prices will drop some more. Either way, your solar stock portfolio is likely to be a long-term investment set for future growth.

 

Which solar companies to invest in

Some solar companies have felt the effect of lower solar stock prices. This decline in prices is out of the control of players in the solar industry. However, many solar companies have strong financial statements and, in some cases, are not as adversely affected by issues like bans on exporting or transportation costs. These companies use alternatives to polysilicon and manufacture their products at plants located in the U.S. It is likely these companies that will benefit most from the rising solar stocks. Here are a few companies worth a look.

 

First Solar (NASDAQ: FSLR)

First Solar produces thin-film photovoltaic (P.V.) modules. The production uses low amounts of energy, water, and semiconductor material which means the manufacturing process itself is more environmentally friendly.

Solar installations with these thin-film solar photovoltaic panels perform better in low light and warm weather compared to panels produced from silicon. The panels are larger than silicon panes which means the cost per watt is lower, making these modules ideal for utility-scale solar energy projects.

The solar company boasts the most robust financial sheets in the industry. Since the company is seldom in debt, it has the cash flow to develop and build its thin-film solar modules continuously.

Although revenue in the second quarter decreased by 22% year on year, the company has cash and equivalents totaling $2.1 billion, up from $255 million in the previous quarter.

First Solar has an advantage over its competitors since its products are manufactured in the U.S. That enables them to sell their solar panels tariff-free.

 

Brookfield Renewable (NYSE: BEP) (NYSE: BEPC) (TSX: BEP.UN) (TSX: BEPC)

Brookfield Renewable generates renewable energy. The energy is then sold to end users who enter into long-term power purchase agreements with the company. Although the alternative energy company is a world leader in hydroelectric power plants, their power is also generated by wind and solar. While the company harnesses a variety of methods to generate their clean energy, it believes that solar energy production could become their primary source of energy generation in the next ten years.

In addition to power generation, Brookfield Renewable also offers energy storage platforms.

The long-term power purchase agreement that the company has adopted means it has a sturdy cash flow. The company has generated an annualized total return of 20% since it was founded. Brookfield Renewable has increased its earnings at a more than 10% compound annual rate through acquisitions and developing projects over the past ten years. This led to a 6% compound annual growth in the company’s dividend yield since 2021. Brookfield Renewable predicts a 20% annual growth until 2025. This could see a dividend increase of between 5% and 9% per year.

 

SolarEdge Technologies (NASDAQ: SEDG)

SolarEdge Technologies produces power optimizers and inverters. These components convert direct current (D.C.) power to alternating current (A.C.) electricity used in the electrical grid. This is needed to use energy generated through solar power in your home.

The company’s power optimizers are more cost-effective than microinverters. These power optimizers have won SolarEdge Technologies a large part of the market share as it enables solar project developers to lower their costs.

SolarEdge Technologies have invested in the energy storage and energy management spheres. Their balance sheets reflect the availability of cash that the company has used to invest in other spaces in the clean energy niche. They have, for example, expanded into batteries, uninterruptible power supply (UPS) systems, grid service solutions, and electric vehicle (E.V.) charging.

 

ALPS Clean Energy ETF (NYSEARCA: ACES)

ALPS Clean Energy ETF focuses on U.S. and Canadian listed companies in the clean energy sector. An exchange-traded fund (or ETF) is similar to mutual funds, but they trade like stocks. That means that ETF prices, like stock prices, change throughout the day as trading occurs. This is different from mutual funds that only trade after the market closes each day.

The fund has been trading since 2018 with over $900 million in assets. Nearly half the fund is made up of the top 10 holdings. These include Enphase Energy, Tesla, Plug Power, and Sunrun.

 

NextEra Energy (NYSE: NEE)

NextEra Energy is the largest producer of wind and solar energy in the world. The company generates electricity at its utilities in Florida and its energy resources segment. From here, it sells power to other utilities and ends users on a power purchase agreement basis.

NextEra Energy has seen above-average growth, generating around 700% total return over the last ten years. The company has seen an increase of 8.7% in earnings per share at a compound annual rate since 2005. The dividend yield grew at an annual rate of 9.6% during the same period. More than that, NextEra Energy has increased its dividend for over 25 consecutive years. This feat earned them a place in the S&P 500 index’s Dividend Aristocrat list.

NextEra Energy predicts an annual earnings growth between 6% and 8% until at least 2023. This could see dividend growth of 10 % until at least 2022.

 

Enphase Energy (NASDAQ: ENPH)

Enphase Energy designs, develops, produces, and sells home energy solutions. The company’s intelligent microinverters are compatible with nearly every solar panel produced in the industry. While their micro inverter technology places them in the leading position in the solar industry, the company offers a complete solar-plus-storage power solution. The company is expected to see an annual earnings growth rate of 43.1%

Other significant energy companies to consider include Tesla, Inc. (NASDAQ: TSLA), Duke Energy Corporation (NYSE: DUK), and General Electric Company (NYSE: G.E.). If you are on a budget, consider investing in alternative energy penny stocks. These alternative energy stocks generally cost less per stock and thus yield lower dividends. On the other hand, it is a slightly lower risk depending on how much money you decide to invest in alternative energy penny stocks. On the other hand, you could stand to see a significant growth of your investment if there is a boom. Penny stocks that increase from 1c to 2c, for example, will see you double your investment. Investing in higher-priced stocks needs a more significant increase to see the same kind of growth of your initial investment.

The energy renewables industry is set to grow exponentially as the world moves away from the use of fossil fuels. Investing in solar energy could be more than installing solar cells on your roof. Now is the ideal time to invest in solar power stocks due to lower stock prices. While it is possible that the price of these stocks may fluctuate for a while, the global move towards green power shows a lot of promise for those investing in clean energy stocks.

 

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