Much of the United States is still zipping up coats and fitting on gloves. And as it were, Punxsutawney Phil saw his groundhog-shaped shadow in Pennsylvania earlier this month, predicting six more weeks of winter.
We’re now about halfway through the superstitious forecast, which means that nature will soon be gearing up for its rendition of The Beatles’ classic, “Here Comes the Sun.”
The song’s famous lyrics may resonate with you folks in frostier regions, where “it’s been a long, cold, lonely winter.” But the sun will soon come again, and “I say, ‘It’s alright!’”
It’s true… a dark cloud has been hanging over the solar industry.
After President Trump won reelection in November, solar stocks experienced a selloff over worries that he would repeal the Inflation Reduction Act. This would halt the flow of loans to the solar industry from the Department of Energy and grants from the Environmental Protection Agency’s “Solar for All” program. Indeed, since assuming office, Trump has paused distributions from the act.
And yet… solar stocks performed far better during the first Trump administration than they did during the Biden administration.
A repeat performance may be imminent. Solar stocks may soon catch fire once again.
So in today’s Smart Money, let’s take a brief tour of the recent past and explain why President Trump’s return to office might signal bright prospects for the solar industry.
Then, I’ll share how you can capitalize on this solar resurgence…
The Trump Solar Paradox
During the first Trump administration, U.S. solar power capacity doubled. Then it doubled again during the Biden administration.
And now, based on the latest forecasts from the U.S. Solar Energy Industries Association, solar capacity will come close to doubling again during the second Trump administration.
In other words, the solar power industry does not seem to care which party occupies the White House or Congress.
It simply continues to grow… and do so at an exponential rate. Last year, the solar industry installed about 40 gigawatts of new capacity, which is more than the total capacity that existed 10 years ago.
No other domestic energy source is growing faster. Last year, solar installations accounted for a record-high 64% of all new U.S. electricity-generating capacity – up from 36% three years ago and 23% six years ago. This renewable energy source now produces enough electricity annually to power one-quarter of all U.S. homes.
Another reason to believe solar power will continue to thrive during the current Trump administration is that growth is the path of least resistance. The U.S. needs more power, and solar is one of the cheapest ways to get it.
Therefore, even if Trump enacts policies that encourage oil and gas development, he will not likely enact policies that actively discourage solar development.
And the nation’s soaring demand for energy – led by the data center construction boom we need for AI – will require an all-hands-on-deck solution. It will need contributions from every major energy-generation source, from nuclear to oil and gas to – you guessed it – solar.
A New Solar Landscape
Moving from political rhetoric to boots-on-the-ground policies, the Trump administration’s initial actions provide more “pros” than “cons” for the solar industry.
As I mentioned above, Trump has paused distributions from the Inflation Reduction Act.
However, Trump is also eager to fast-track energy projects of all types – both by removing regulatory obstacles and by providing direct government support.
These efforts are great news for the U.S. solar industry, because the main growth constraints it faces are physical, not political. Like most of the power sources in the United States, solar installations often struggle to overcome lengthy permitting processes and grid bottlenecks that can delay projects for years.
The National Energy Emergency Act that Trump signed into law last month seeks to eliminate all obstacles to what it calls “energy security.” In the words of the act…
The integrity and expansion of our Nation’s energy infrastructure — from coast to coast — is an immediate and pressing priority for the protection of the United States’ national and economic security…
Although Trump clearly intends for fossil fuels to take the lead in delivering energy security, solar will also play an essential role, even if government subsidies disappear forever.
According to recent data from Ernst & Young, solar power has become the cheapest source of energy in most locations. For example, the levelized cost of solar energy is at least 29% lower than the cheapest fossil fuel option, including natural gas combined cycle plants.
In other words, solar power is no longer a quirky, fringy obsession of “tree-huggers.” It has joined the club of legitimate, economically viable energy sources.
In 2019, I recommended Daqo New Energy Corp. (DQ), a company that makes and sells polysilicon for solar panels. And a little more than a year after that recommendation, Daqo delivered a 148% gain.
I believe that solar stocks are presenting another compelling opportunity, just like they did during the first Trump administration. And at Fry’s Investment Report, we’re positioned to capitalize on the solar sector’s sunny transformation.
