What happened
Shares of solar stocks were pummeled in trading Monday, as the solar industry got bad news from the White House. Shares of Sunrun (RUN 2.19%) were down as much as 11.3%, SunPower (SPWR -8.41%) fell as much as 11.1%, and Canadian Solar (CSIQ -0.67%) fell 11% at its low point. The three stocks were down 10.4%, 6.3%, and 8.3%, respectively, at 3:20 p.m. EDT.
Renewable energy stocks were down as a whole and as industry leaders, so it's no surprise Sunrun, SunPower, and Canadian Solar were hurt most. Let's get into why renewable energy is down today.
Image source: Getty Images.
So what
The biggest news is that the White House issued a proclamation over the weekend stating that tariffs would be implemented on previously exempted bifacial solar panel imports, and that tariffs on imports will rise from a planned 15% next year to 18%. Increasing the tariff percentage and ending the bifacial exemption is intended to increase the cost-effectiveness of U.S.-produced solar panels. In reality, very few solar panels are produced in the U.S., so the real impact is raising costs for solar installers.
For Sunrun, the added cost could squeeze its margins just after it closed on acquiring Vivint Solar last week. On the flip side, manufacturers such as Canadian Solar could see lower demand from U.S. developers because of tariffs. SunPower is a bit of a mixed bag, with a tariff exemption for some of its solar imports and standard tariffs on others.
At the same time tariffs appear to be going up, stimulus talks that were a potential boon for renewable-energy developers appear to be falling apart. The White House and Congress don't appear to be close to passing a deal, and with the election only a few weeks away, the clock is running out.
Now what
Both of these news items may seem bad, but let's put the day into a bit of context. Tariffs originally put in place in early 2017 did very little to affect the pace of solar installations in the U.S., which you can see in the following chart. Some companies felt a financial impact, but that was because tariffs went from 0% to 30%, so a small 3-percentage-point increase isn't meaningful.
US Solar Energy Consumption data by YCharts
The other context to bear in mind is that solar stocks have had an insanely good month, so one down day isn't surprising. You can see here that all three of these stocks are up by double digits over the past month, even after today's drop:
Given the regular volatility of solar stocks and the little impact that proposed policy changes will have on the industry, I wouldn't be alarmed by today's move. The solar industry still has a bright future, and even a hostile White House proved it can't change the industry's trajectory.
