Solar stocks are on the move, with several noteworthy names hitting new 52-week highs. For instance, Enphase Energy (NASDAQ:ENPH) shares are spiking more than 7% and hitting all-time highs. First Solar (NASDAQ:FSLR) stock is also climbing on the day, up more than 5% and hitting its highest level since 2011.
Others on the move include SolarEdge Technologies (NASDAQ:SEDG), SunPower (NASDAQ:SPWR), Maxeon Solar (NASDAQ:MAXN) and Sunrun (NASDAQ:RUN). Of course, the Invesco Solar ETF (NYSEARCA:TAN) is rallying nicely too, up more than 6%.
So what’s the catalyst? Specifically for Enphase Energy, it’s up on reports that it will partner with BayWa, a renewable energy company based in Munich. Others are up due to the energy crisis happening around the world. A little help from the U.S. federal government doesn’t hurt, either.
How Does an Energy Crisis Boost Solar Stocks?
There’s a lingering energy crisis impacting California, Europe and other parts of the world. Europe recently saw one of its hottest summers to date and energy bills are now spiking, while California is experiencing scorching temperatures and inevitably strained power sources. In fact, California Governor Gavin Newsom put out a Flex Alert in hopes of conserving as much energy as possible.
With energy bills surging in the U.K., new Prime Minister Liz Truss is preparing to commit up to 150 billion pounds (or $172 billion) to keeping costs under control for households and businesses. She hopes to cap annual energy bills at 2,500 pounds, or $2,860, for the next two years. While it seems like a necessary step to curb the energy crisis, investors are weary of the plan, as the country is already on shaky financial ground.
While energy prices have been declining lately, there is fear in Europe as we approach the winter months. An energy shortage would only send more price shocks through the system, creating a larger headache for consumers.
Although interesting, what does this have to do with solar stocks?
A brewing energy crisis will force more countries to focus on renewable energy sources. That, of course, is a positive for solar stocks as countries look to break their dependence on any one energy source. Need proof? Look no further than here in the U.S.
The Inflation Reduction Acts Helps Solar Too
The U.S. government recently passed the Inflation Reduction Act, which has some very big positives for solar stocks. The bill is “allocating about $370 billion to programs to mitigate the effects of climate change over the next 10 years.”
It includes tax credits, rebates and, according to The Wall Street Journal, “hundreds of billions of dollars in incentives for companies to manufacture clean-energy equipment such as solar panels and electric-vehicle batteries, as well as tax credits for companies that build green-power projects using American-made components.”
Combine all of these together — along with the strong earnings reports from the industry this quarter — and it’s a recipe for continued strength in solar stocks.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
