Even as the U.S. churns out more fossil fuels, evidence abounds that alternative energy in general—and solar in particular—is staging a comeback of sorts. And the halo effect has spread to solar stocks.
Observers credit an increase in solar capacity, falling photovoltaic (PV) costs and the extension of tax credits for renewable energy for the sector's revival. Rather than mounting a competitive threat to oil and gas, solar energy is instead carving a niche in creating electricity, experts say.
Solar power has "the ability to create very local opportunities … where you don't have to be interconnected to a whole bunch of infrastructure like crude," said Richard Hastings, a macro strategist at Global Hunter Securities. "Wind and solar have found their way into the major fuel story for electric power generation."
According to the Energy Information Administration, renewable power for electric generation surged 23 percent over the last year, becoming the second biggest source for new generator capacity. At the same time, natural gas—rapidly becoming the dominant source for generating electricity—appeared to plateau.
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Solar industry observers say a big part of solar's resurgence is the permanence of the federal government's Investment Tax Credit (ITC). The Solar Energy Industries Association calls the credit "one of the most important federal policy mechanisms to support" solar initiatives in the U.S.
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The solar boom has created a wave of investor enthusiasm for companies like SolarCity, which has more than tripled in value over the last year.
More emphasis on energy efficiency will lead to more upgrades in power grids, and more demand in both domestic and international markets, Baird added.