Renewable energy concepts, such as solar power, have been around for a few decades. However, elevated costs and inefficiencies largely subdued mass adoption. Combine with an enduring cheap natural gas supply, and there were largely no incentives to upgrade (aside maybe a government grant/tax break).
That narrative appears to be moving into the past, as the costs associated with solar and other renewables have seen a sizable drop to levels that are more pragmatic for mass upgrades and adoption. Meanwhile, renewable energy technology has rapidly improved its efficiencies, making them now more viable alternatives to traditional power sources.
According to ResearchandMarkets.com, the United States solar energy market is forecast to experience a compound annual growth rate (CAGR) of 15% between 2020 and 2025. The market research firm cites improving costs, government initiatives, and private-sector planned upgrades as key drivers for the industry growth.
U.S. Federal and State Governments Likely a Key Driver of Solar Upgrades
One of the key drivers of the mass adoption of solar power will come from federal and state government initiatives. Several U.S. states, including California and New Jersey, have initiated solar power targets by 2030, which will look to cut the dependence on electrical generation by around 50% in those states.
Similarly, President-Elect Joe Biden championed renewable energy upgrades, including solar, during his administration. One of Biden’s “Day One” initiatives is to “take on the existential threat of climate change.” As a result, renewable energy trade groups are becoming increasingly optimistic about future growth.
Despite the COVID-19 pandemic, U.S. solar installations are steadily continued ahead in 2020. During the second quarter of 2020, 3.5 gigawatts (GW) of solar photovoltaic was installed across the United States. This brings the U.S.’s total solar capacity to 85 GW, which is enough to power 16.1 million homes.
According to the Solar Energy Industries Association (SEIA), the U.S. solar market is estimated to see an additional 100 GWdc installed between 2021 and 2025. This represents more than 42% than was installed over the past five years combined. Expect the government to be a key driver of this growth.
PRISM Emerging New Economy Index and Small/Micro Cap Solar Companies
Investors Prism’s Emerging New Economy Index is a diversified index that features emerging industries and technologies; including a handful of small-to-micro-cap solar energy stocks. Here is a breakdown of the solar stocks currently listed in the index:
SunPower Corporation (NASDAQ: SPWR): San Jose, CA-based solar solutions company that provides solar power components, such as panels and system components. SunPower offers both commercial and residential installation services, as well as leasing options for solar power systems. SunPower serves a wide range of customers from residential builds to commercial and government entities.
Canadian Solar, Inc. (NASDAQ: CSIQ): Based out of Guelph, Canada, Canadian Solar is engaged in the design, development, manufacturing, and sale of solar components, such as ingots, wafers, cells, modules, and more. The company serves a wide range of customers, similar to SunPower. As of January 31, 2020, Canadian Solar’s Energy department maintained a solar power plant capacity of around 880.2 MWp.
Overall, solar and other renewable energy systems are preparing for a mass adoption revolution. After years of fine-tuning the technology and improving associated costs, solar power is finally becoming a viable alternative to traditional electrical generation. Small and micro-cap solar companies could be a potentially-ideal way to ride the revolution. Regardless, expect solar energy and renewables to play a bigger role in U.S. energy consumption moving forward.