Prices for solar stocks fell again this week, with the MAC Global Solar Energy Stock Index falling from around $161 at the beginning of the week to a close of $155 on Friday. This follows several months of decline, with the index losing a third of its value from a high of over $240 in May.
This has included some of the leading global companies, such as Trina Solar, the world’s largest PV module maker, which saw its stock tumble from around $13 mid-June to under $10 in August.
The fall has been particularly steep since late June, when the MAC index was still around $220. This was at the same time that prices of Brent and WTI Crude Oil began their most recent decline, from at or slightly above $60 a barrel to well below $50.
However, this change in oil prices has little inherent relationship to the solar industry. Ever since the oil prices began to decline in the middle of last year, investors have wrongly drawn negative correlation between the fall in oil prices and solar, notes Mercom Capital CEO Raj Prabhu. There is no real connection here.
He also notes that this fall in stock prices is happening as solar markets remain strong. Fundamentals continue to be strong in the solar sector, panels prices continue to go down, and we will see another year of solid installation growth globally, states Prabhu.
In major solar markets, including as the United States, China and Western Europe petroleum is used primarily as a transportation fuel, and oil-fired power plants represent a small share of overall capacity. As such, not only would oil prices have to fall to a very low level to make oil-fired generation competitive with other sources, but there is little capacity to supply.
Oil was a more significant fuel for power generation in many nations in the late 20th century, and as the association remains in public perception.
And while this dynamic has affected much of the industry, some stocks have bucked this trend. First Solar saw its stock price jump to above $50 in August, after falling to below $45 in July.
Other stocks are reacting to company-specific matters. Share prices for both SunEdison and its yieldco TerraForm Power fell sharply after the company reported its earnings on August 6th, with SunEdison stock losing more than 1/3 of its value in less than one week.
Analysts attribute this fall to concerns about a high level of debt at SunEdison, which has been buying up other renewable energy companies.