Donald Trump Looks Poised to be a Positive for Solar Stocks. Why Are They Down?

By Larry Ramer

The Street appears to believe that the incoming Trump administration will be negative for solar energy and solar energy stocks. Indeed, between the election and yesterday’s close, the Invesco Solar ETF (NYSEARCA:TAN) dropped 2.6%.

Of the five biggest solar-related stocks (as shown below), only Nextracker (NASDAQ:NXT) is in the green in the intervening weeks, though it’s only eked out a 0.2% gain. 

But one of Donald Trump’s biggest financial contributors during the 2024 campaign and his frequent, current companion, Elon Musk, has always been a tremendous fan of solar energy. What’s more, the investment fund controlled by Trump’s son-in-law, Jared Kushner, has reportedly invested a significant sum in a firm called Mosaic that helps homeowners obtain loans to finance the purchase of solar panels. 

And finally, Trump has pledged to double America’s electricity capacity. Given that  — and the fact that solar is one of the cheapest forms of energy available — I believe that the incoming president has an important, policy-related incentive to back solar. 

In light of all of these considerations, I do not expect the Trump administration to seek to repeal the solar tax credits that Congress passed during the Biden administration. I hold that view despite the fact that the president-elect has promised to eliminate all “ giveaways “ included in the Democrats' climate law. The latter legislation established a 30% tax credit for residential solar and a 2.75 cents per kilowatt-hour electricity production tax credit which is geared toward utilities. 

Since I don’t expect the new Trump administration to repeal the tax credits, while there are likely to be large surges in U.S. electricity demand over the longer term, I’m bullish on solar stocks going forward.

Solar’s Got Musk’s Backing, Kushner’s Investment

Elon Musk has long been a tremendous backer of solar energy, and Tesla (NASDAQ:TSLA) owns and operates a residential solar-panel installation business. 

To get a sense of the extent to which Musk backs solar, consider that in September, he wrote that “it (is) utterly obvious that essentially all energy generation will be solar.”

As for the president-elect’s son-in-law, Kushner’s company “co-led a $200 million funding round in 2022 for Mosaic. Mosaic reportedly had a valuation of over $1 billion, so Kushner’s 10%-plus stake was likely worth more than $100 million at that time. 

Trump’s Electricity-Generation Pledge

During the 2024 election campaign, Trump called for doubling America’s electricity-generating capacity in order to help the country become a leader in AI. Solar energy would be one of the cheapest ways to do that. 

According to one source, utility-scale solar costs as little as $6 per megawatt hour with current subsidies, versus a minimum of $45/MWh for gas combined-cycle plants and $110/MWh for gas-peaking plants. 

Also worth considering is that solar in combination with pumped-storage hydropower is solving the intermittency issue that has long plagued solar. When solar is combined with pumped-storage hydropower, during periods of low demand for electricity and/or a high supply of sun, excess energy is used to pump water to a higher elevation. When electricity demand rebounds and/or the supply of solar energy is low,  the water goes downhill, creating electricity through the use of turbines.  

Disclaimer: The author did not hold a position in any of the securities mentioned above. The information provided in this article is for educational and informational purposes only and should not be construed as investment advice. Always conduct your own research or consult with a licensed financial professional before making any investment decisions. Past performance is not indicative of future results.

Larry Ramer is currently ranked 209 out of 30,308 financial bloggers analyzed by TipRanks, with a 15.8% return on his buy and sell ratings. He has been a long-time contributor to InvestorPlace, Seeking Alpha and Fintel.io. He is one of the founding contributors to this newsletter. 

He focuses on contrary investing and specializes in the renewable energy and consumer discretionary sectors. Among his highly successful, contrarian picks have been Plug Power, Exxon Mobil, solar stocks, and airline stocks. On the downside, he was an early predictor of the collapse of cryptocurrencies, marijuana stocks, Ocugen, and Meta Platforms.