Solar stocks struggle with demand, reduced incentives
Renewable energy companies are particularly struggling while facing a heavy hand of economic headwinds, volatile markets, and higher for longer interest rates. These pressures have squeezed solar energy stocks over the past couple of quarters as consumers appear less inclined to spend on solar installations. In addition, California — the biggest U.S. market for solar panels — cut down on solar panel incentives earlier this year.
Yahoo Finance Reporter Ines Ferre joins the Live show to discuss how this sector of the market is hurting and what this means for electricity prices going forward.
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Video Transcript
- Well, investors are turning a nervous eye to the solar names as the renewable energy industry faces weakening demand and less political incentives. At its helm, appears to be SunPower, which cut its full year guidance on low demand for its systems. Let's bring in Yahoo Finance's Ines Ferre to give us more details. I know you've been tracking a lot of this for us.
INES FERRE: Yeah, and there are several players when we talk about these solar energy stocks. So let's take a look at one that is up right now Sunrun, the stock is up today after the company reported its quarterly results. But this company is putting in a charge down of $1.2 billion taking that charge down after an acquisition of Vivint Solar that is a peer that it acquired three years ago. And the company said during its earnings call that it is going to be focusing on lowering costs and also selling higher margin home batteries.
And the stock is up as you can see, but year to date, the stock is down about 50%-- more than 50%. Because these stocks are taking a hit because of the environment that we're in. We're in a higher interest rate environment, the CEO of Sunrun was talking about this during the earnings call, talking about the volatile times that the industry is going through because of these higher interest rates and also some important policy changes, namely in California, whereby the owners of solar panels when they want to sell back to the grid excess energy, they can't sell it back at the price that they could before.
This policy went into effect this year. So this basically disincentivizes owners or people from getting solar panels for their rooftops. SunPower is another company that you just mentioned also, the solar panel and battery energy storage maker. It reduced its outlook on weak demand. But the company says that it's going to be seeing tailwinds in the future because of tax incentives, because of the Inflation Reduction Act that was passed last year, that is pouring billions of dollars into the green energy initiative.
And also because of higher electricity costs going forward. Because the solar panel makers, the solar panel companies are saying that electricity costs going forward are going to make the solar panel industry more attractive for people. And then you've got SolarEdge, which reported its quarterly results. Right now it's down more than 9%.
The company reducing its guidance for the fourth quarter to 300 million to upto 350 million. And the Street was expecting more than 700 million. So that is quite a haircut for the guidance for the fourth quarter.
And part of what happened is what is happening in Europe, which is also another big component of what's happening in the solar industry. And that is weakening demand in Europe.
In Europe last year, you saw a spike of installations after the Ukraine war when you saw energy prices going higher. And now that demand is weakening. And the company, SolarEdge, saying that it's seeing a large amount of cancelations or push out of orders. So that's certainly having an impact on the industry as a whole as well, Rachelle.
