Solar Energy Industry Under Pressure In Europe And The US

April 19, 2024 22:51

Some say that solar energy is one of the types of green energy that may help us save the environment. While there has been an increasing number of investments in solar energy in the last few years, solar energy companies seem to face pressure when it comes to their valuations. Solar energy stocks have suffered as economic conditions across the world weigh on the industry’s trajectory.

By reading this article, you will have an overview of what’s happening with solar energy stocks as well as getting some forecasts for the future of the solar energy industry sector.

EU Vows To Protect The Solar Energy Industry 

On April 15th, the European Commission (EC) revealed its proposal regarding the European Solar Charter (ESC) in response to the challenges facing Europe’s solar manufacturing industry. The document sets out a series of voluntary actions to be undertaken to support the EU photovoltaic sector. However, it does not mention any EU trade tariffs or restrictions on cheap solar panel imports, coming, for example, from China.

The EC noted that it would support “the competitiveness of the European PV manufacturing industry and promoting the creation of a market for high-quality products meeting high sustainability and resilience criteria, in full respect of the EU’s climate and energy objectives.”

According to a report by Politico, twelve of the largest firms representing more than 70% of the EU’s solar panel production requested the EC’s support seeking to unlock subsidies equivalent to €880 million over the next two years.  According to the International Energy Agency (IEA), EU countries installed record levels of solar capacity in 2023, 40% more than in 2022. However, most panels and parts were Chinese imports.

US Solar Industry Worries About Its Future

In the US, the local solar energy industry worries about the future in a very competitive environment where China seems to have the upper hand. Clean energy tax credits under the current government’s landmark Inflation Reduction Act (IRA) have helped solar industry firms to withstand the competition.

However, some analysts suggest that, with the US presidential elections due in November, a change of guard in Washington could turn out to be negative regarding subsidies under the IRA.

The IRA is in effect from 2022. A report published by Rhodium Group on February 29th, 2024, showed that “clean energy and transportation investment in the US set another record in Q4 of 2023, reaching $67 billion—a 40% increase from Q4 in 2022.” The report notes: “we estimate a total of $34 billion in federal investment—including tax credits, grants, and the fiscal cost of government loans—went to clean energy and transportation projects nationwide in fiscal year 2023 (October 1, 2022 through September 30, 2023). There was $220 billion in total investment in clean energy and transportation projects during the same period.

US To Restore Import Tariffs On Solar Panels? 

A Reuters report on April 17th suggested that the US government is ready to restore import tariffs on imported solar panel technology. It should be noted here that there has been an exemption for the last two years allowing China as well as other countries to avoid paying for the products sent to the US.

Reuters reporters cite sources in White House and note that these measures could fuel solar industry plans related to building more than 40 solar equipment factories in the country. In its announcement, the Solar Energy Industries Association (SEIA) said that “we hope the Administration is prepared to directly support increased domestic manufacturing of solar modules by raising the tariff rate quota on cells.”

First Solar: Is 2024 Going To Be A Good Year?

First Solar is a solar technology company that offers photovoltaic (PV) solar energy solutions in the United States and internationally. The company manufactures and sells PV solar modules with a thin film semiconductor technology that provides a lower-carbon alternative to conventional crystalline silicon PV solar modules that its competitors tend to use. 

On the back of the Reuters report (April 17) regarding import tariffs, First Solar shares rose by 3% on Nasdaq. First Solar is considered the largest U.S. solar company and has seen a streak of beating earnings estimates, especially when looking at the previous two quarter reports. However, analysts suggest that First Solar sales might not be immune to high interest rates that hurt consumer budgets, especially in the US where it is the main client pool.

SolarEdge: Long Term Growth Remains Primary Target

SolarEdge made the headlines early in 2024 as the management team decided to cut 16% of its global workforce, with many of the jobs being in its Israeli headquarters. Job cuts were justified as a part of a general restructuring plan that includes stopping production in its Mexico plant and the reduction of manufacturing in China.

Commenting on job cuts, SolarEdge CEO Zvi Lando said: “We remain confident in the long-term growth of the solar energy market… These changes do not impact our strategic direction and priorities and we remain committed to continue to drive the renewable energy transformation.”

SolarEdge was founded in 2006 and reached a market cap of $20 billion before retreating to around $3.8 billion. During the presentation of Q4 2023 economic results, the company’s management said that “looking ahead, we expect underlying demand to improve in the second and third quarter, given typical seasonal improvements and market dynamics discussed earlier.”

Enphase Energy: Restructuring Plan Under Way

Enphase will release its Q1 2024 financial report on April 23rd. A Yahoo Finance report, citing Zacks Equity Research, said that “Solid shipment of batteries backed by a solid demand trend in the solar market is expected to have contributed favorably to ENPH’s top-line growth. Region-wise, the Netherlands, France, Germany and Europe are likely to have witnessed an accelerated demand in the to-be-reported quarter, thereby contributing to the company’s revenues.”

It should be noted that, in Q4 2023, Enphase announced dropping revenue for the third consecutive quarter, suggesting that a drop in equipment sales in Europe contributed to this decline. Enphase has decided to  lay off 10% of its global workforce as part of its restructuring plan.

Trading Solar Energy Stocks With Admirals

Despite drawbacks, the solar energy industry has potential as the world turns collectively to types of green energy. An Admirals account allows you to trade some of the most popular solar energy stocks in the market such as SolarEdge Technologies, First Solar, SunRun,  Enphase, and ETFs such as the Invesco Solar ETF.

If you are just starting to trade, you should always remember that lack of experience may lead to mistakes. Therefore, it would be best to receive some training and use educational materials to upgrade your skills. Brokers offer guides, articles, videos and webinars to traders so there is an abundance of materials online that you could benefit from. What makes it even better is that, sometimes, they come totally for free!

One more thing that beginner traders should know is that trading involves risk. Since you can’t know how markets could move, it would be good to learn how to use risk management tools such as the stop loss order and the take profit order. While these tools cannot eradicate risk, they could help limit your losses, giving you a less stressful trading experience.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Miltos Skemperis
Miltos Skemperis Financial Content Writer

Miltos Skemperis’ background is in journalism and business management. He has worked as a reporter on various TV news channels and newspapers. Miltos has been working as a financial content writer for the last seven years.