Guggenheim Solar Index: Underperforming solar stocks and significant challenges

In June, solar stocks underperformed, writes Jesse Pichel of ROTH Capital Partners. The U.S. residential market retains a positive outlook, though rising prices and forced labor concerns represent significant challenges.

Image: Image: Roth Capital

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From pv magazine 07/2021

07010_Stock_Index-21_2sp-1The Invesco Solar ETF (TAN) decreased 2.5%, while the S&P 500 increased by 1.1% and the DJIA decreased by 1.8%. The top five performing solar stocks in the US all saw gains: Sunnova Energy International, Inc. (23.4%), Generac Holdings, Inc. (23.3%), Enphase Energy (20.0%), Sunrun, Inc. (18.9%), and SunPower Corp. (10.0%). The index performed marginally better relative to the past couple months (April – 8.7% decline and May 6.4% decline).

The industry still faces many challenges: Rising equipment costs, supply and labor shortages, and constraints on the supply of Chinese polysilicon products. But demand remains strong and is expected to continue through H2 2021, provided federal and solar tax credits persist. Installation companies are experiencing 30-35% YoY growth; but as an unnamed industry executive puts it, “the question is how much can be delivered given the industry wide supply chain and labor challenges.”

Prices for racking and modules have increased ~8%. The residential market is expected to feel less impact given its higher margins compared to utility scale; the total price change may only be $0.05/W. Contractors may have greater ability to absorb increases in supply costs.

Polysilicon prices are expected to increase to around CNY 225/kg (US$35) in Q3 before coming back down to CNY 175/kg (US$27) at year’s end due to the slow purchase volume from module manufacturers in H1 2021.

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On June 10th, US Congress requested immediate action from customs after detailed allegations of prevalent forced labor in Xinjiang, where around 50% of the world’s polysilicon production is located.

The Biden administration has now ordered a ban on polysilicon imports from Hoshine Silicon Industry Co. and three other Chinese companies in Xinjiang, a move that may impact the US solar industry and undermine the White House’s aggressive climate change goals.

By Jesse Pichel

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