The green energy sector has garnered a lot of attention throughout 2021 as elected officials and professionals strive to address the threats posed by climate change. The recent adoption of President Joe Biden’s Build Back Better package has given Wall Street reason to believe sectors such as construction and infrastructure could record gains in 2022. However, a new report recently pointed to the future. less bright for some clean energy players. , in particular for the solar energy sector. The supply chain crisis is creating bigger problems for companies producing new energy solutions than some might realize. As a result, solar stocks took a hit today.
What’s going on with solar stocks
Released this morning, the report in question was drafted by the Association of Solar Energy Industries and Mackenzie Wood. Like CNBC reports, he predicts that the U.S. solar power industry will experience a growth rate of less than 25% of what had been planned before. Much of this is due to the crisis in the supply chain and rising raw material costs. Solar stocks fell quickly as this news broke.
Unsurprisingly, it hasn’t been a good day for companies in the solar energy sector. Enphase Energy (NASDAQ:ENPH) was down 5.25% at market close, but for its competitors things were worse. SunPower (NASDAQ:SPWR) has seen its shares drop nearly 10.78% as of this writing, while Sunrun’s (NASDAQ:CLASSES) was down 15.7% at market close. All three solar stocks had seen slight declines in the week leading up to this. However, nothing has been as bad as the downturn all three have experienced today.
ENPH and SPWR were recently named to a list of energy stocks to buy for the coming winter. Seen from here, it could be a strategy to rethink.
Why is this important
There’s no denying that this news is casting dark clouds over an industry that seemed poised for growth in 2022. At the same time, it’s hardly surprising. As the report notes, the costs of materials needed for all types of manufacturing have risen sharply throughout the year. This complicates the operation and the respect of deadlines for the companies carrying out the building. In addition, we have also seen trade uncertainty increase throughout 2021 as the supply chain crisis has strained areas such as international trade. We have seen the solar energy industry grappling with the imposed constraints by the 2018 trade war sparked when former President Donald Trump imposed tariffs on some of the United States’ trading partners. The sector was vulnerable then, just as it is now.
None of this is to say that the solar energy sector does not have great potential. It absolutely is. And the importance of its technology should not be underestimated, especially since the field of energy storage appears to be an area to watch for investors.
“Do you want to have another planet to live in 50 years from now?” ” request Investor place ”s Luke Lango in a recent analysis the utility of energy storage. “We need solar, wind and hydrogen power. It’s that simple. “
What this means
He is certainly right that alternative energy solutions are becoming more and more necessary. Naturally, the demand for the services of the companies that produce them will only increase. Having said that, it is clear that our government will have to find solutions to deal with the crisis in the supply chain.
It should be noted that it is not just solar stocks that are under the pressure caused by today’s news. Some of their alternative energy counterparts such as NextEra Energy (NYSE:BORN) have also declined today. At a time when we need alternative energy solutions the most, external factors threaten innovation. As long as there are no solutions, the future will not be bright for solar stocks.
At the date of publication, Samuel O’Brient had (directly or indirectly) no position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines