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Impact of Decline Crude Oil Prices on Solar PV Stocks

Date-January 27, 2015

Solar PV Stocks Have Followed the Crude Oil Price Pattern

Solar PV and crude oil are not direct substitutes to each other; however solar PV industry is losing shine with the international oil price plummeting to below $50/barrel. Generally, a high global crude oil price is a good factor for both oil and gas, and solar PV companies, but tide is not favorable at the moment.

Plunging crude oil prices are shifting investor sentiment away from solar PV companies which has towed down stock prices of listed solar companies. Solar PV stocks are underperforming since the oil price moving southwards.

Table below shows the declining stocks prices of global solar PV leader companies along with dropping crude oil prices stocks prices.

Table 1: Decline of Solar PV Manufacturing Industry Leader’s Share Price vs Oil Price Drop, June 2014 – Jan 2015
 
Trina Solar
Yangli Solar
ReneSola
First Solar
JA Solar
SunPower
Brent Price/bbl
Price/share on June 2, 2014
12.83
3.74
2.95
71.06
10.86
40.98
109.34
100%
100%
100%
100%
100%
100%
100%
01-Jul-14
87%
88%
83%
87%
81%
90%
101%
01-Aug-14
98%
90%
93%
98%
85%
93%
95%
02-Sep-14
94%
83%
~100%
92%
85%
83%
92%
01-Oct-14
82%
78%
81%
79%
77%
78%
86%
03-Nov-14
78%
74%
61%
54%
80%
69%
78%
01-Dec-14
72%
63%
48%
41%
75%
63%
65%
02-Jan-15
65%
51%
41%
33%
71%
60%
51%
Note: Share of solar stocks and crude oil on June 2, 2014 is considered as a base price to study the trend
during June 2014- Jan 2015.
Source: EINFOANALYTICS Research Desk
Industry has a Divided View on the Impact of Dropped Oil Prices on Solar PV

Few industry analysts believe that prolonged low oil price could damage equations for renewable energy sector. A slump in the oil price will drive down the gas price, leading to lower household heating and lighting bills. It will hamper profitability of already subsidized renewable and lead more gas fired stations. “It would destroy value on existing renewable energy projects and make it difficult to raise financing for future projects,” says Peter Atherton, utility analyst at Liberum Capital.

Other industry analysts believe that dropping oil prices is not a worry for the solar PV industry. Deutsche Bank energy analyst Vishal Shah yesterday released a report that suggested there would be “limited/no impact from recent oil price weakness” on the solar industry, with PPA prices in the U.S. immune from oil fluctuations. In China, Shah added, government appetite to tackle air pollution also protects the solar industry from external volatility, while the U.S. residential solar market is even more insulated from external forces, which spells good news for companies like Solar City2.

In Japan, energy advisor to the government and senior fellow at Mitsui Global Strategic Studies Institute Takashi Hongo told Bloomberg that “renewables are supported by policies, and that is not something that will be amended quickly just because oil prices fall,” suggesting there will be hardly any negative impact to the solar industry.

EINFOANALYTIC View on Impact of Falling Oil Prices on Solar PV Market

At EINFOANALYTICS, we see that cheap oil price affected on solar PV stocks and market in past six month and will have an impact in future as well. We believe there is no apparent reasons to believe that oil price will rebound in short to medium term. Various factors contributed to the sharp fall in oil prices: a worldwide drop in demand, expansion of production, and the US shale gas boom have all contributed, and nobody is quite sure where it will all end and reverse.

Low oil prices will directly and indirectly to keep a tab on natural gas prices, a reason to growth in natural gas electricity generation. It can impose a competition between renewable and natural gas up to some extent. However, it is not a panic situation for solar PV industry and stocks and market will rebound with the higher demand from countries such as India, China, Japan and few other European countries. In medium to long term, crude price volatility will only strengthen governments, utilities and consumers view to think for more stable energy alternative.