After years of disinterest, solar stocks are suddenly the center of attention on Wall Street.
For example, the share price of Sunrun, the largest solar panel producer in the US, is up more than 300% this year, while the Invesco Solar index fund has more than doubled in 2020.
More support for clean energy
These increases, according to CNN Business, may be partly explained by investors expecting the Democrats to win the US election, which is expected to lead to more federal government support for clean energy: Democratic presidential candidate Joe Biden wants to see CO2 emissions from the electric grid by 2035 will be reduced to zero.
Solar panel maker Sunrun acquired rival Vivint in July for $ 3.2 billion in an agreement that merged America’s two largest solar companies.
Investors have flocked to Sunrun stocks in the hope that the acquisition and a more favorable Washington energy policy will further fuel the company’s growth.
Clean up the wallet
In the meantime, many investors have ditched shares in companies that produce fossil fuels. For example, oil giant ExxonMobil was recently dethroned as the largest energy company in the US (by market value) by the clean energy company NextEra Energy.
The Invesco WilderHill Clean Energy index fund, which owns shares in Sunrun, SunPower, Tesla and similar companies, nearly doubled in price this year. In contrast, the Energy Select Sector SPDR fund, which is dominated by oil companies like Exxon and Chevron, is down 50%.
‘Politics don’t have that much influence’
Profit for Biden appears to be priced in. But Lynn Jurich, founder and CEO of Sunrun doesn’t think politics will have that much of an impact on the future of the industry. “In terms of elections, it’s interesting that solar has support from both sides,” said Jurich. “That encourages us regardless of the outcome.”
Joe Biden has proposed nearly $ 2,000 billion in federal investment to address the climate crisis and create jobs. There are also plans to install eight million solar panels on the roofs of homes.
Biden also wants to ask Congress to make the installation of solar panels for homeowners tax deductible for longer. This deductible item would disappear in 2022.
More sustainable money
Regardless of the election outcome, analysts expect the trend towards more sustainable investment to continue.
Michael Weinstein, an analyst at Credit Suisse, receives many requests from fund managers in the oil and gas sector who are under pressure to hedge their portfolios against the long-term risk that fossil fuels will be replaced by renewable energy.
This trend partly explains why solar companies such as Sunrun have seen their valuations rise sharply this year. “It has brought more money into the system,” Weinstein said. “And more money sometimes means higher prices.”
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