Solar Power's Unstoppable Growth: A Trump-Proof Opportunity
Saturday, Nov 23, 2024 3:29 am ET
3min read In the wake of Donald Trump's election as president-elect, there's been a wave of uncertainty in the renewable energy sector, particularly in solar stocks. However, it's crucial to remember that the solar power movement is too big and too well-established for Trump to halt, presenting an opportunity for investors to buy First Solar (FSLR) stock on the dip. Let's delve into the reasons why solar power will remain a strong investment, despite political headwinds.
First, solar power is now cost-competitive with more common forms of energy production. Data from Wood Mackenzie and the U.S. Department of Energy indicates that utility-scale solar power is now in line with the cost of natural gas and coal-fired power. This cost-competitiveness has fueled the U.S. solar power production capacity growth, with a record-breaking 32.4 gigawatts added last year. For the first time ever, solar accounted for over half the country's expansion of its electricity-generating potential, and this growth has continued to accelerate through 2024 despite economic headwinds.
Second, Trump's ability to reverse legislation like the Inflation Reduction Act (IRA) is legally limited and politically challenging. The IRA offers taxpayers a tax credit of up to 30% of the cost of a solar power system, incentivizing utility-scale solar power projects and the manufacturing of solar panels. While Trump can undo executive orders, he cannot unwind voted-upon legislation without new legislation to repeal or replace it. There doesn't appear to be enough political will at this time to undo a law backing a movement that's already well-supported and reducing utility costs, with Pew Research indicating that two-thirds of Americans are for the advancement of alternative energy sources.
Moreover, First Solar is strategically positioned to navigate potential challenges. As an American manufacturer serving the North American market, over 90% of its immediate revenue opportunities await in the region, shielding it from geopolitical headwinds. First Solar's Cadmium Telluride (CdTe) photovoltaic panels, which are more durable and deliver more power than conventional silicon panels, give it a competitive edge in utility-scale markets. Utility-scale buyers increasingly view these high-performance panels as an investment rather than an expense, as they further lower the effective per-kilowatt cost of solar power.
Lastly, the solar industry's growth is accelerating in states that voted for Trump. Largely because it's the cheapest means of adding utility-scale power production, solar is growing like wildfire in several states like Texas, Oklahoma, and Kansas that picked Trump to be president. To the extent voters picked Trump for economic reasons, they'll certainly appreciate cheaper electricity and its positive impact on the economy.
In conclusion, the solar power movement is too well-established and cost-competitive for Trump to halt. First Solar, with its strategic positioning and superior technology, is well-positioned to capitalize on this growth. Investors should consider buying First Solar stock on the dip, as the long-term prospects for the solar industry remain robust, despite political uncertainties. By focusing on stability, predictability, and consistent growth, we can build a balanced portfolio that combines growth and value stocks, positioning ourselves for success in the renewable energy sector.
First, solar power is now cost-competitive with more common forms of energy production. Data from Wood Mackenzie and the U.S. Department of Energy indicates that utility-scale solar power is now in line with the cost of natural gas and coal-fired power. This cost-competitiveness has fueled the U.S. solar power production capacity growth, with a record-breaking 32.4 gigawatts added last year. For the first time ever, solar accounted for over half the country's expansion of its electricity-generating potential, and this growth has continued to accelerate through 2024 despite economic headwinds.
Second, Trump's ability to reverse legislation like the Inflation Reduction Act (IRA) is legally limited and politically challenging. The IRA offers taxpayers a tax credit of up to 30% of the cost of a solar power system, incentivizing utility-scale solar power projects and the manufacturing of solar panels. While Trump can undo executive orders, he cannot unwind voted-upon legislation without new legislation to repeal or replace it. There doesn't appear to be enough political will at this time to undo a law backing a movement that's already well-supported and reducing utility costs, with Pew Research indicating that two-thirds of Americans are for the advancement of alternative energy sources.
Moreover, First Solar is strategically positioned to navigate potential challenges. As an American manufacturer serving the North American market, over 90% of its immediate revenue opportunities await in the region, shielding it from geopolitical headwinds. First Solar's Cadmium Telluride (CdTe) photovoltaic panels, which are more durable and deliver more power than conventional silicon panels, give it a competitive edge in utility-scale markets. Utility-scale buyers increasingly view these high-performance panels as an investment rather than an expense, as they further lower the effective per-kilowatt cost of solar power.
Lastly, the solar industry's growth is accelerating in states that voted for Trump. Largely because it's the cheapest means of adding utility-scale power production, solar is growing like wildfire in several states like Texas, Oklahoma, and Kansas that picked Trump to be president. To the extent voters picked Trump for economic reasons, they'll certainly appreciate cheaper electricity and its positive impact on the economy.
In conclusion, the solar power movement is too well-established and cost-competitive for Trump to halt. First Solar, with its strategic positioning and superior technology, is well-positioned to capitalize on this growth. Investors should consider buying First Solar stock on the dip, as the long-term prospects for the solar industry remain robust, despite political uncertainties. By focusing on stability, predictability, and consistent growth, we can build a balanced portfolio that combines growth and value stocks, positioning ourselves for success in the renewable energy sector.
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