Solar stocks and the American solar problem


Researchers from the US Department of Energy NOTnational Rrenewable Eenergy Llaboratory (NREL) have created the most efficient solar cell ever recorded – 39.5% efficiency under normal solar lighting – which is 0.3% higher than the record they set in 2020. These small extra gains show how difficult it is to increase efficiency, but it all comes down to the whole dollar- powerful. There is always a trade-off between price and efficiency, which is why today’s most efficient solar panels are around 22% efficient.

Credit: Clean Energy Advisory

These efficiency numbers continue to slowly increase, and this is the first year that the six most efficient solar panels averaged 22% (according to Clean Energy Reviews who created the character abovet). This means that large-scale solar projects can now produce energy at a lower cost than coal, which is still more than 20% of American electricity production. With solar representing only 2.8% of utility power generation in the United States, there is plenty of room for growth. Unfortunately, this is now at a standstill.

The American solar problem

Our technology stock portfolio contains significant exposure to renewables, so we are concerned about what is happening in the US right now. Simply put, a domestic solar panel maker has pressured the current administration to look into sourcing solar panels from overseas that could circumvent tariffs put in place on importing Chinese solar panels. As a result, an investigation was opened and the supply of solar panels dried up, putting a large number of solar projects on hold.

For the past ten years – under three different presidential administrations – the United States has imposed tariffs on the import of Chinese solar panels, even though the majority of the American solar industry has never supported them. The Solar Eenergy Iindustries Aassociation (SEIA) represents the interests of 1,000 companies operating in the solar industry in the United States and they have dedicated a whole page to explaining how detrimental these tariffs have been to the growth of solar power in the United States.

Credit: Solar Energy Industries Association

The current issue isn’t just about tariffs, it’s a complaint filed by a small California solar panel maker, Auxin Solar, which accuses China of circumventing tariffs by using Southeast Asian countries. . Cambodia, Malaysia, Thailand and Vietnam were responsible for more than 85% US imports of solar panels during the fourth quarter of 2021. An investigation was launched by the US Department of Commerce in late March and preliminary findings are to be announced within 150 days. At that time, the investigation may cease or extend for a further 215 days.

Meanwhile, solar expansion projects in the United States have frozen. Indeed, the investigation could result in the imposition of new anti-dumping tariffs – ranging from 50 to 250% – on these four countries, perhaps even retroactively. Earlier this month, 25 U.S. senators signed a petition asking President Biden to fix the problem quickly because it risks crippling US solar growth. According to the petition, “Industry surveys indicate that 83% of U.S. solar companies say they have been notified of canceled or delayed panel supply.”

We struggle to understand the logic here. If the Chinese government wants to subsidize solar panel manufacturing and produce cheap solar panels, let them. China already produces 86% of the world’s photovoltaic panels. Helping a small, struggling US solar manufacturer at the expense of the entire US solar industry seems foolish. Just import cheap panels and produce cheap solar power loads.

The impact of tariffs on solar stocks

If you’ve invested in US solar panel makers, you should probably rethink that bullish thesis if they’re relying on the government to penalize competition. If you’re a U.S. residential solar investor, you have a lot more to worry about than tariffs, because those tax breaks will soon be gone. When that happens, residential solar will no longer be cost-competitive at all. At the higher end, it’s actually the most expensive way to generate electricity.

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When we checked The 10 largest solar stocks in the worldwe opted for SolarEdge (SEDG) due to their minority exposure to the United States – 40% of 2021 revenues – and their position as a world leader in the production of inverters and optimizers, solar equipment that apparently cannot be replaced by substitutes Chinese cheaper. Industry analysts say, “SolarEdge Technologies Inc. may see increased backlogs and delays until the panels can be acquired. All we need to do going forward is watch the metric below highlighted in yellow.

Credit: SolarEdge 10-K

Note that their dependence on the United States has gradually decreased over time, from 47% in 2019 to 40% today. Unfortunately, they don’t provide this geographic breakdown in their 10-Q reports, only in the 10-K, so it will be difficult to monitor their US earnings throughout the year.

The other renewable energy stock in our portfolio is the one we are most concerned about, NextEra Energy (BORN), The world’s largest renewable energy company.

The impact of tariffs on NextEra Energy

The largest electric utility company in the world by market capitalization also happens to be the largest renewable energy company in the world. They’re too busy executing to worry about things like putting together readable investor decks, so we’re forced to wade through mounds of paperwork trying to answer simple questions – like how much solar energy is produced by NextEra Energy? The company’s website says 17,000 megawatts of renewable energy are produced, and the latest earnings report says 3,600 comes from solar power. It may be a small percentage now – just 21% – but the company’s expansion plans are anything but. NextEra’s flagship utility, Florida Power and Light, has the largest solar power capacity of any utility in the world with plans to nearly triple that through 2026. Below you can see the companies with the largest solar expansion projects currently on hold.

Credit: S&P Global Market Intelligence

In the final remarks on NextEra Energy’s earnings call, it’s worth reading how clear the company’s response is as to why this investigation is only stunting solar growth in the United States (starts at the bottom of page 11). Given that US solar panel makers are out of panels until 2024 and are only able to meet 10-20% of US domestic demand, the government survey is of little help to protect solar panel manufacturers. They go on to say:

It should also be noted that nearly all of the major domestic solar panel assemblers in the United States do not support the efforts behind the circumvention claim or the Commerce Department’s decision to investigate, as they also rely primarily on cells imported from Southeast Asia to produce their panels. in the USA.

Credit: NextEra Energy Earnings Call Notes

NextEra believes the Commerce Department is unlikely to impose new tariffs, as it goes against historical precedent. As for the business impact, here’s what they said:

Based on what we know today, we believe that approximately 2.1 to 2.8 gigawatts of our planned solar and storage generation for 2022 could be increased from 2022 to 2023.

Credit: NextEra Energy Earnings Call Notes

Our Two Hundred

The expansion of solar to become the dominant form of electricity generation will only happen for economic reasons. America’s choice to stifle growth by imposing tariffs on solar panels will prevent optimal growth from occurring, but it will not prevent advances in solar energy elsewhere in the world. NextEra Energy’s future growth prospects are looking bleak now, but things may well get worse depending on the survey results. This is where the management team will need to make smart decisions about what to do after the result. We are less concerned about the impact this might have on SolarEdge given their international exposure.

We believe that many green energy proponents don’t really care about saving the planet. They are more interested in trying to exert control over others because they cannot achieve positions of authority through skill. Common sense and a shared desire to produce more clean energy is pushed aside because – well, that’s what we can’t fathom, but you can bet it has something to do with obsession America’s favorite – political wrangling. No wonder the Chinese dominate the production of solar panels.


When the conversation turns to blaming the current administration, just remember that this tariff problem has existed through three administrations, so it has nothing to do with donkeys and elephants. All lawmakers are responsible for damage to the US solar industry. But the Biden administration currently holds the ball and must act decisively, and in the best interest of the majority, or solar will never become the dominant energy source in the United States.

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