What's Happening To Solar?

With President Barack Obama's Clean Power Plan (CPP) promoting renewables and solar panel installations expected to rise by a third this year, one would expect that shares of solar firms would be through the roof. However, investors have been getting out of the market quickly, causing prices to plummet.

The MAC Global Solar Energy index has declined 33 percent over the past three months and new market entrant Sunrun Inc RUN has fallen 6.04 percent since the beginning of August.

The Argument For Solar

Not only is Obama promoting alternative energy sources like solar power through the CPP, but the costs associated with installing solar power have declined significantly in recent years. A federal subsidy has taken the cost of solar installation lower by 30 percent and with borrowing costs low, homeowners are better able to make the shift. Many companies have taken advantage of this by offering to install the systems for very little money upfront so customers can repay their loan over time using the savings they accumulate with a lower electricity bill.

Related Link: Could Solar Energy Be Headed For Consolidation?

Times Are Changing

However, this environment isn't expected to last forever. The federal subsidy that has supported the solar boom is set to decrease by 10 percent by 2016, and some worry that this will cut down on enthusiasm. Investors are also concerned about the Federal Reserve's upcoming rate hike, which could roil markets further and suppress borrowing for things like solar panels.

Energy Loss

Another problem plaguing shares of solar firms has been the decline in oil. Many ditched solar shares alongside those of oil firms for fear that the drop in oil prices would cut down on demand for alternative energy sources like wind and solar. Analysts claim that this fear is unfounded though, as oil doesn't generate power and shouldn't impact that sector.

Risky Business

Despite the growing interest in solar, the industry is still considered risky as it remains a more expensive power option than conventional means like coal. That means that solar firms are relying on money from the government to subsidize their costs, which isn't guaranteed from year to year, especially with a change of administration in the upcoming year.