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Solar Energy Is On Track To Become The New Energy King

When COVID-19 started its relentless march across the globe in March, there was some concern that it would put the solar industry to a halt. This fear was derived from the fact that residential solar sales are usually sold door-to-door as well as plant closures and increasing pandemic-related costs. But this scenario did not play out. In fact, the construction industry has been booming this year.

Innovation

The pandemic has also brought about some innovations that were a long time coming for solar energy. Residential solar companies were forced to adapt their sales to a digital framework. SunPower Corporation (NASDAQ: SPWR) is one of the leaders in this digital-first approach, but Tesla Inc (NASDAQ: TSLA) has also caught this wave. Moreover, when it reported its earnings last week, the company revealed it is aiming for its solar business to be just as strong as its main star, the EV business. Elon Musk announced that Tesla's next ‘killer product' is its Solar Roof and that everyone will see why next year. But even Sunrun Inc (NASDAQ: RUN) is adapting to a new normal with fewer physical touchpoints so competition will be intense.

Improved Profitability

At the end of the day, the reason solar stocks are up this year is the improved financial performance. Canadian Solar Inc. (NASDAQ: CSIQ), JinkoSolar Holding Co., Ltd (NYSE: JKS), Solaredge Technologies Inc (NASDAQ: SEDG), and Enphase Energy Inc (NASDAQ: ENPH), four of the biggest equipment suppliers in the industry have remained strong during the pandemic, with some companies also seeing margins increase.

But this piece of good news is a result of the industry focusing more on specializing rather than vertically integrating. For example, SunPower has spun off its development business, inverter manufacturing, and its solar manufacturing arm which led it to better financial results and better margins almost across the board.

Politics

Considering that Joe Biden has taken a clear polling lead over Donald Trump, the boost of solar stocks is not a surprise. Biden's strategy is much more focused on clean energy than Trump's, despite not being supportive of the "Green New Deal."  The overall perception is that Biden will be good for the industry.

Affordability Solar power is already the cheapest source of electricity in some parts of the world, according to a new report released on October 13th by the International Energy Agency (IEA). This was greatly enabled by governmental policies in more than 130 countries that aim to encourage the rise of renewables by reducing the cost of building new solar installations. Outlook

As solar technology continues to improve and innovation continues to drive those costs down, solar is on track to become "the new king of electricity supply." With global efforts to put climate change under control, the solar industry is expected to dominate over the next decade. The EU alone has set a goal to source 32 percent of its energy from renewables by 2030, therefore, the forecast for solar is sunny.

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