Analyst: Oil's impact on solar 'only superficial or derivative'


But in a research note sent to clients this week, Pavel Molchanov, a senior analyst at Raymond James Financial, said that nearly the entire solar sector has “only a superficial or derivative connection to oil prices.”

This is because diesel and other petroleum-based fuels make up only 5% of global electricity supply, according to the International Energy Agency. In many key markets, such as the United States, oil makes up only about 1% of power generation.

“There are certain geographies where power prices can be influenced by oil prices, but the relevance for solar stocks is overwhelmingly sentiment-based rather than fundamental,” wrote Molchanov.

According to Carlos Newall, an equity research associate at Raymond James, “Less than 20% of global PV installations have even a tenuous connection to oil prices.” Markets that do have a material relevance include Japan, Korea, Taiwan, Saudi Arabia and Iran, he said in an email.

“When thinking about markets where solar demand could be at all susceptible to oil price changes, even if it is just theoretically, these are the only ones that matter.”

Raymond James expects oil prices to rebound toward the end of 2015. “In addition to directly helping those clean tech companies that have a close connection to petroleum, there may be some sentiment boost for clean tech as a whole,” wrote Molchanov, adding, however, “most importantly, it again bears repeating that clean tech simply does not lend itself to making broad calls.”

James' remarks echo those of Deutsche Bank, which made a detailed argument why a correlation between the solar industry and oil prices should not be made in its 2015 solar market outlook yesterday.

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