After slumping last year, solar stocks and exchange traded funds are moving higher in 2017.
For example, the Guggenheim Solar ETF (NYSEArca: TAN) is higher by almost 10% to start the year while the VanEck Vectors Solar Energy ETF (NYSEArca: KWT) is up nearly 6%.
KWT tracks a group of global companies involved in photovoltaic and solar power, or the provision of solar power equipment/technologies and material or services to solar power equipment/technologies producers. TAN also follows global companies involved in the solar industry and the entire value chain.
Solar stocks slid last year as increased competition pushed prices lower while customers pushed off on purchases in hopes of further cheaper prices, especially with Chinese companies raising production. Still, there are some positive signs.
“For the first time, solar power installations formed the largest group of electricity generating capacity of any energy source, according to a new report from Greentech Media,” reports CNBC. “Nearly 40 percent of new power generation projects added last year were solar, in terms of electrical production capacity. A record 22 states each added more than 100 megawatts, the report said.”
The solar industry has been tightening its belt and improving business efficiency in light of the falling prices. For instance, SunPower said it would lay off an additional 25% of its workforce, or 2,500 employees, and close one plant to reduce costs.
Government subsidies helped green energy technology get its foot in the door, but lower costs will help the industry compete with fossil fuel. Economies of scale has been the top driver of falling prices – for example, the cost of solar power has plunged to 1/150th of its level since the 1970s and solar installation has surged 115,000-fold.
“GTM Research analyst Cory Honeyman said in an interview with CNBC that utilities are also making significant investments in solar power in states that have no renewable energy requirements, such as many states across the Southeast,” according to CNBC.
Some members of TAN’s lineup remain heavily shorted.
“Solar firms haven’t experienced nearly the same amount of covering as their conventional peers. Two solar firms, Sunpower and Solaredge, both make this week’s list of heavily shorted names. Both have been profitable short targets over the last 12 months as their shares have fallen by 70 percent and 46 percent over this period respectively,” said Markit.
For more information on the photovoltaic panel industry, visit our solar category.