It was not thought to be a “Trump Trade,” but the Guggenheim Solar ETF (NYSEArca: TAN) and the VanEck Vectors Solar Energy ETF (NYSEArca: KWT) are proving to be surprisingly strong this year.
For example, TAN, the largest solar exchange traded fund, is up nearly 9% even as many investors assumed alternative energy stocks would be imperiled with Donald Trump in the White House.
KWT tracks a group of global companies involved in photovoltaic and solar power, or the provision of solar power equipment/technologies and material or services to solar power equipment/technologies producers. TAN also follows global companies involved in the solar industry and the entire value chain.
Solar stocks slid last year as increased competition pushed prices lower while customers pushed off on purchases in hopes of further cheaper prices, especially with Chinese companies raising production. Still, there are some positive signs.
“While investor questions do not reflect concern in the popular press regarding rooftop cancellations, we expect the topic will be relevant given stock reaction. Of potential greater interest for U.S. utility-scale solar-development and battery-storage opportunities will be curtailment. 162 megawatt hours (MWh) of solar and wind energy were curtailed in California in the first quarter, up 2 times year-over-year and higher in March (82 MWh) than January and February (80 Mwh),” according to a Credit Suisse note seen in Barron’s.
The clean energy sector found support under President Barack Obama as the administration pledged to fight against global warming and climate change through heavy subsidies into green technology. However, Trump, who called climate change a hoax perpetrated by China, pledged to cancel last year’s Paris climate agreement and remove Obama’s Clean Power Plan, could reverse years of supportive alternative energy policies.
“We cut our 2017 U.S. rooftop forecast to 2.9 gigawatts (GW) (up 12% year-over-year) versus 23% year-over-year growth in 2016 (2.6 GW). State-level regulatory challenges, market saturation and SolarCity’s pivot are more pertinent issues than cancellations, in our view. First-quarter data at the state level was a mixed bag — new applications declined in California, New York, Hawaii, but grew in Arizona, New Jersey and Massachusetts,” according to the Credit Suisse note posted by Barron’s.