Top 5 Solar Energy Stocks

Solar energy stocks offer investments in a clean, renewable, and abundant resource while the solar energy market is experiencing both organic and state subsidized growth. In our analysis, we filtered through the solar industry and selected companies with a mix of innovation and growth potential. We focused on quality companies that you can put on your watchlist, but their equity has different risk profiles and should be examined individually.

There are roughly three ways to invest in solar: decentralized residential systems, innovation alpha, and industrial solar electricity production. The companies in this collection are a mix of these categories as we aimed to prepare a balanced list.

In the grand scheme of things, solar is a small part of the electricity market. Electricity consumption in the U.S. was around 3.94 terawatts (TW, equal to 1000 gigawatt/GW) in 2021, with solar making up 71GW or 1.8%. The fastest way to supercharge solar generation is with decentralized installations that have a two-way connection to a grid. This means that it is much more effective if people manage to turn solar power into a profitable home investment, instead of relying on companies to build large solar farms. However, there are soft - regulatory and cultural bottlenecks in this vision, as well as the hard bottleneck of sustainable lithium-ion battery production.

Initiatives like the Inflation Reduction Act of 2022 (IRA) intend to spur renewable energy growth, allowing both adopters and investors to benefit. The program allocates US$369 billion to renewables, aimed to produce 155 gigawatts of additional solar and wind energy capacity in the U.S. by 2030 - equating to a 35% boost for utility-scale solar photovoltaics. Investors in this field are also supported by the US senate, which aims to deliver US$60 billion in subsidies to clean energy companies, and US$280 billion subsidies from the chips act.

A common misconception for solar power is that it needs to be closer to the equator because the temperature is warmer, however solar panels need sun hours, not heat, which means that panes will be effective as long as there is sunlight exposure, even if they are located in colder regions like Canada, giving the technology a wider reach.

Analyst’s Notes

The most recent catalyst to dramatically accelerate the growth of the solar industry is the Inflation Reduction Act of 2022. With it, US$369 billion is being allocated to U.S. renewables. The Renewable Energy Subsidy program would boost renewable infrastructure with 155 gigawatts of additional solar and wind energy capacity in the U.S. by 2030 - Equating to a 35% boost for utility-scale solar photovoltaics.

Before the bill, the U.S. was on track to have cumulative totals of nearly 200 GW solar. Now, with the expansion of renewable energy tax credits under the law, the 2030 total is expected to be 270 GW.

Utility-scale solar capacity (excluding home installations) in the U.S. at the beginning of this year stood at about 71 GW, so the expected increase to 270 GW would mean a near-quadrupling of capacity by the end of the decade.

The U.S. currently has approximately 11 gigawatts of photovoltaic module production capacity, according to consultancy Wood Mackenzie, out of a global capacity approaching 500 gigawatts as of 2021. China is home to 70 to 98 percent of the world’s production capacity for the silicon-based materials and components in PV panels, according to S&P Global. China has invested more than US$50 billion in solar PV manufacturing capacity since 2011, the International Energy Agency recently reported.

As Canary Media’s Jeff St. John recently explained, "This could offer solar projects a potentially more lucrative tax credit value since the cost of solar projects is declining compared to the value of the electricity they will produce over time."