US solar rise collides with higher rates and shifting economic backdrop

The booming US residential solar market is at a crossroads. It’s being supported like never before by expanded federal funding and fears of increasingly fragile grids and volatile fuel prices. But Solar is also facing unprecedented headwinds, including rising interest rates, cuts in government subsidies, a weaker economy, and historic rainstorms.

Investors got an early glimpse of which trend might prevail on Wednesday when SunPower Corp. ushered in a week-long period of three of the largest US residential solar companies reporting earnings. SunPower said it sees continued growth ahead of it. But the market was less optimistic as shares of SunPower and fellow home solar companies Sunnova Energy International Inc. and Sunrun Inc. have fallen at least 28% since President Biden signed into law the inflation-cutting bill in August.

“These are serious headwinds, but reversible headwinds,” said Pol Lezcano, an analyst at BloombergNEF. “There are opportunities for the industry to adapt to keep the market at a reasonably high level of activity.”

The bumpy start to the year follows a banner 2022. The U.S. residential solar sector almost certainly set an annual record for installations last year — potentially growing as much as 30%, Lezcano said. Even with a potential economic slowdown, 2023 could top last year’s stakes, though the country would find it harder to meet Biden’s lofty climate goals.

Hopes for an expanded deployment are bolstered by Biden’s new climate law, which will usher in billions of dollars in new clean energy finance. They are also helped by fuel costs, which have pushed up electricity prices in many regions, and potential power shortages, which have led to more frequent blackouts on grids like California and Texas.

“Utilities keep sending us new customers,” Sunnova chief executive John Berger said in an emailed statement. “Last year the price of electricity rose more than in the previous 10 years combined.”

At the same time, rising interest rates increase the cost of financing panel purchases. And California, by far the largest market in the US, is facing a deep cut in subsidies, heavy rains that slowed installations in January, and widespread layoffs in the tech industry, whose employees tend to be ideal solar customers.

Still, following a slowdown in bookings from mid-November to mid-December, SunPower CEO Peter Faricy is cautiously optimistic about 2023 after seeing growing demand in the first few weeks of the year.

“The signal is pretty positive at the moment,” he said in an interview late Wednesday. “All states are doing better than planned.”

Bloomberg writer Will Wade contributed to this report.

Leave a Reply

Your email address will not be published. Required fields are marked *