Renewable energy, particularly solar, has had an incredible year in 2020, despite the pandemic and economic challenges. Solar’s growth has been driven by falling installation costs, government policies, greater energy storage efficiencies, growing adoption, and a focus on reducing carbon emissions. The Invesco Solar ETF (NYSE: TAN), one of the most popular pure-play solar ETFs, has surged over 172% year-to-date, as of mid-December 2020.
U.S. Government Planned Upgrades Give Solar a Boost
According to ResearchAndMarkets, the U.S. solar energy market is estimated to see a compound annual growth rate (CAGR) of 15% between 2020 and 2025. The market research firm notes that supportive government policies are a key driver of growth within the United States.
On the state and federal level, the government is increasingly moving to renewable energy alternatives to cut emissions, costs, and upgrading energy infrastructure. Some states like California and New Jersey have implemented their own renewable power initiative targets, where these states will look to cut electrical generation by 50% by 2030.
President-Elect Joe Biden has been a vocal supporter of renewable energy throughout his campaign. One of Biden’s “Day One” priorities is to “take on the existential threat of climate change.” This bodes well for the renewable energy markets.
U.S. Installations Grew in 2020 Despite Pandemic, Costs Tumble
The solar market showed its resilience in 2020, as installations continued across the United States despite the COVID-19 pandemic. During the second quarter, around 3.5 gigawatts were installed across the U.S. This increases the country’s total sun-powered energy capacity to 85 GW, which has enough energy to power 16.1 million homes.
According to the Solar Energy Industries Association (SEIA), U.S. installations are only expected to continue growing. Between 2021 and 2025, the SEIA estimates an additional 100 GWdc of solar power will be installed across the United States.
As previously noted, one of the key drivers of installation growth has been the dramatic fall in costs. In 10 years, solar electricity prices have cratered 89%. According to Fast Company, it was 223% more expensive to build a new solar farm in 2009 than a coal plant. Now, those figures have reversed.
Asset manager, Lazard, recently published a report in October 2020, that compared renewable energy costs to other forms of energy. Lazard found that solar and wind produce the cheapest energy, even more than natural gas.
Six Small Companies For 2021
The growth in renewable forms of energy continues to be a global phenomenon. In October 2020, China unveiled the world’s largest solar energy project. Huanghe Hydropower Development added the 2.2 GW plant to the power grid in remote Qinghai province. The project is backed by 202.8 MW/MWh of storage capacity.
In 2019, Europe saw a massive jump in installations, effectively doubling its capacity. By the end of 2019, Europe had added 16.7 GW of solar energy capacity, which was up from 8.2 GW installed in 2018.
With solar taking on global growth, here are six small-caps that are poised to benefit from the industry’s growth:
- Beam Global, Inc. (NASDAQ: BEEM)
- Maxeon Solar Technologies, Ltd. (NASDAQ: MAXN)
- ReneSola, Ltd. (NYSE: SOL)
- SPI Energy Co., Ltd. (NASDAQ: SPI)
- Sunworks, Inc. (NASDAQ: SUNW)
- VivoPower International PLC (NASDAQ: VVPR)
Disclosure: Matt Rego and Spotlight Growth do not have any positions or relationships with any companies mentioned in this article. This article should not be taken as a solicitation or recommendation to buy or sell any securities. Please conduct your own research and consult your financial advisor to determine your risk tolerance and investment path. We are not licensed brokers or investment advisors.