First of all, the current oversupply and turmoil in the market will no doubt keep driving solar costs down. Over time the oversupply in the market should rebalance and solar companies will be able to healthily compete against fossil fuels at somewhere around grid parity. Agreed.
However, clean energy investors have the just as much right to manage risk and dodge bullets in the short-term as any other investors.
So, I first recommended getting out of all positions on Sept 2nd due to overall market risk – see here.
Since then, I’ve written a series of articles specifically about the affect of this political pantomime on the financing funnel available to solar developers. For example, see here and my most recent article on the issue here.
Back then, on September 2nd First Solar, for example, closed the day at $90.10. As I write, it is now trading at $49.66 – a decline of 45%. At last night’s close that number was even worse.
That seems to have been a bullet worth dodging.
The next stage in this political pantomime will be the issue of the need to renew the 1603 Treasury grant program at the end of the year. The politics will make this very difficult. Thus the financing funnel for the utility scale sector’s 24 GW pipeline will be constrained further.
This is, of course, all political farce – but unfortunately the affect on the ability of developers to finance their projects is very real.
Finally, on overall market direction – I think we’ll get a decent deal out of Europe soon and the global stock markets will rally back – for a fuller discussion see here. That will probably allow solar to bounce back on good days.
However, I’d rather play that rally being long stocks that don’t have the same headwinds. An outright SPY position probably makes more sense for now. In the current environment, if you’re long solar you’re not just betting on solar as a solution, you’re betting on the politics. And I simply don’t think that’s a good bet to take.
Disclosure: I am long SPY. I have no other positions in the stocks discussed.