Surging Utility Bills Could Prove Boon for Solar Sector in Need of Uplift

Jul 27, 2022 by Bloomberg
image is BloomburgMedia_RFOWQNDWLU6801_27-07-2022_20-00-09_637944768000000000.jpg

A worker lays down a solar panel on a rooftop during a SolarCity Corp. residential installation in Albuquerque, New Mexico.

Leading US residential-solar companies are about to give an early glimpse into whether higher energy costs are driving Americans to install panels on their roofs—a potential boon for an industry grappling with policy, trade and supply challenges.

Sunnova Energy International Inc., Sunrun Inc. and SunPower Corp. are scheduled to release their second-quarter results over the next week-plus that may provide such insight. Early indications are promising: Tesla Inc., once the country’s biggest residential-solar company, said July 20 that the second quarter marked its best three-month stretch of deployments in more than four years.

Energy inflation could prove a surprising advantage for residential solar—an industry at the forefront of the country’s fight against climate change. Solar firms could actually see their products gain competitiveness in some US markets, despite higher material and capital costs that, in some cases, are being passed on to consumers. The reason: soaring utility bills.

“Rising utility rates across the country are increasingly impacting homeowners, and as rates continue to rise, solar energy services are quickly becoming the more attractive option,” Sunnova Chief Executive Officer John Berger said Tuesday in a statement. “Our customers are experiencing a level of energy savings greater than ever before and so naturally more people are switching and will continue to switch to solar.”

Read: US utility bills could jump 40% on energy rally, Barclays says

Pol Lezcano, an analyst at BloombergNEF, has done a rough calculation of the potential effect of higher utility bills in California: Homeowners who choose to go solar could save more than $1,000 in variable electricity costs in the first year, compared with $940 had they done so in 2021. This could prove a boost to new installations in the state if utility rates stay at the elevated level through year-end, he said in an email.

Residential demand exceeded expectations in the first half of the year, though permitting appeared to slow in June, Goldman Sachs Group Inc. analysts said in a Monday note, citing data from Ohm Analytics. Sunrun in May boosted full-year installation-growth guidance to 25% or more from an earlier forecast of 20% or greater. Still, shares in Sunnova and Sunrun are down more than 30% this year, while SunPower’s stock has fallen about 21%.

“Utility rates are increasing rapidly, and with relentless summer heat from coast to coast, so are energy demands,” SunPower’s CEO Peter Faricy said Wednesday in a statement. “We are hearing from our customers that they are turning to solar because it’s a more affordable and more reliable option.”

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©2022 Bloomberg L.P.

By Brian Eckhouse

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