The picture-in-picture feature on my wide-screen TV has helped me understand the recent volatility in SunPower (NASDAQ:SPWR). Oh boy, I can hear you thinking… what kind of crazy idea do you have this time? Unlike some of my fringe concepts, you’ll see the logic with SPWR stock on this one (hopefully).
It was there that the natural disaster (and human tragedy) of the Texas winter storm couldn’t be any worse and I found my lesson on SPWR.
When you rely on the environment — basically sunny weather — to support your energy initiative, you must take the good with the bad (as in terrible weather). As a side note, this appears to be a karmic message for the U.S.: when you sell out American workers to communist countries, you occasionally get communist problems, like intellectual property theft and pandemics.
But is the winter storm a repudiation of SPWR stock and similar entities? Or is this a discounted opportunity which speculators should advantage?
The Cons of SPWR Stock Got Exposed
Primarily, the reason why the winter storm was so devastating for SPWR stock is the broader realization that we’ve got a long way to go before achieving true energy independence. In other words, solar energy is an intermittent source. If the sun doesn’t want to cooperate, you don’t get your power.
Where SunPower and other leading solar-energy companies distinguish themselves is offering battery storage systems. While your solar panels are “collecting” energy from the sun, this can be harvested and stored for later use, especially in case of emergencies. According to SunPower’s website, one battery pack can provide three days of backup for an 1,800-square-foot home.
However, even without factoring in the latest natural disaster, you must remember that battery storage systems are expensive. According to the U.S. Energy Information Administration, the “average energy capacity cost of utility-scale battery storage has rapidly decreased from $2,152 per kilowatt hour (KWh) in 2015 to $625/KWh in 2018.”
Since the average home uses roughly 29 KWh daily, you’re talking a cost of over $18,000 to cover one day of usage. Therefore, to cover three days of use should mean a price tag exceeding $54,000. Yes, solar companies provide payment plans and over time, you will break even. From there, it’s money in your pocket. Still, we’re talking significant cash outlays at a very inopportune time.
Plus, millions of Texans were out of power for several days. Unless you skipped town like some folks I won’t mention, you’re feeling the pain if you’re a Lone Star state resident.
To be fair, this issue doesn’t just affect the green energy infrastructure. Obviously, traditional energy sources failed as well. But what it does point to is that solar energy isn’t a be-all, end-all solution. And in times of natural disaster, the cost of going green could hinder immediate practical solutions; hence, the red ink on SPWR stock.
Reason for Longer-Term Optimism
Nevertheless, looking at the chart for SPWR stock, you can’t deny the broader enthusiasm for the solar-energy industry. I was wrong to cast doubt on the sector’s viability. As well, the winter storm isn’t just a green energy problem — nobody got off easy on this one.
Indeed, looking at the issue from a big-picture perspective, the winter storm is long-term bullish for SPWR stock. How so? With battery storage systems and improvements in this technology, we can harvest energy during the good times and save it for when we truly need it.
Moreover, I’d rather have three days of power — or even several hours — in a natural disaster. At the very least, I can backup important digital documents and perform other core duties that require electricity. Thus, the volatility in SPWR stock is reactionary. Over time, this may be a solid entry point for patient investors.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.