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These solar energy stocks are poised to profit from energy crisis in Europe

By Angela Barnes


Updated

Concept photo of solar panels
Responses to the energy crisis in Europe may benefit solar energy stocks – Photo: Shutterstock.

Solar power has the potential to help solve the energy crisis in Europe as it scrambles to find alternative electricity sources in time for winter - so which solar energy stocks might gain as sun-powered companies help the bloc push ahead with renewables and profit at the same time? 

Solar photovoltaic (PV) is becoming the lowest-cost option for electricity generation in most of the world, which is expected to propel investment in the coming years, according to the International Energy Agency (IEA).

Aside from this, solar technology – which converts sunlight into electricity – reduces the use of fossil fuels and is also sustainable and secure.

Invesco Solar ETF (TAN) price chart

However, the IEA warned in a special report published Thursday that global manufacturing capacity for solar panels has increasingly moved out of Europe, Japan and the United States over the last decade and into China, which has taken the lead on investment and innovation.

It said China’s share in all the key manufacturing stages of solar panels exceeds 80% – and whilst it has been instrumental in bringing down costs worldwide for solar PV, the level of geographical concentration in global supply chains also poses potential challenges that governments need to address.

“Accelerating clean energy transitions around the world will put further strain on  these supply chains to meet growing demand, but this also offers opportunities for other countries and regions to help diversify production and make it more resilient,” said Dr Fatih Birol, executive director of the IEA.

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First Solar Inc. (FSLR) share price

Investing in solar solutions

Craig Erlam, market analyst at OANDA, told Capital.com on Tuesday that Europe was already committed to its green transition but the war in Ukraine has undoubtedly accelerated that as it can no longer rely upon Russia to meet its energy needs.

“It finds itself very vulnerable after years of overreliance and it must do everything to ensure that won’t happen again.

“In the near-term, that means finding alternative producers and paying a significant premium longer-term. Green energy is going to be key and those already established are going to be at the forefront of the push. Of course, there will be opportunities for all in the space as the desperation to become self-reliant means investment will be heavy,” Erlam said.

Energy firms in the solar space

Companies already established in the space include Shell (RDSB), which has a number of solar projects in operation and under development in the Netherlands, Oman, Australia, Canada and in the US.

Royal Dutch Shell (RDSB) share price

The energy giant also recently expanded its solar investment in Italy, acquiring 100% of solar development company Solar-Konzept Italia Srl from Solar-Konzept International GmbH in January. The acquisition increases Shell’s solar development pipeline in Italy to approximately 2GW.

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BP (BP) also established, announced last year that is was boosting its renewable business in the US with a 9GW solar acquisition from 7X Energy, as part of its plan to progress towards a target of developing 20GW of low carbon energy by 2025.

BP (BP) share price

However, as Craig Erlam mentioned, there will be opportunities for all firms in the space as Europe scrambles to increase its alternative energy supplies quickly.

Piero Cingari, analyst at Capital.com, also previously highlighted that companies like Encavis AG and RWE AG (RWE) may also benefit, when it was made apparent that solar energy was on course to account for 60% of global renewable power growth in 2022.

“Encavis AG, a small independent power producer that acquires and operates solar and onshore wind parks, is showing a positive trend on the stock market, and its shares have risen since the outbreak of the war in Ukraine, indicating that investors are beginning to expect higher earnings growth. In the coming years, also the large RWE AG might potentially witness exciting growth,” Cingari said.

RWE (RWE) share price

Investopedia highlighted top solar stocks that are ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-on-year (YOY) percentage revenue growth - and most recent quarterly YOY earnings-per-share-growth. The list included solar firms Daqo New Energy Corp (DQ), which manufactures and sells polysilicon to photovoltaic product manufacturers in China.

Daqo New Energy Corp. (DQ) share price

Two other solary energy stocks showing recent growth are Enphase Energy Inc (ENPH), which creates, develops, manufactures and sells home energy solutions platforms, and SolarEdge Technologies Inc (SEDG), which  designs, develops, and sells direct current optimised inverter systems for solar installations.

Enphase Energy, Inc. (ENPH) share price

SolarEdge Technologies, Inc. (SEDG) share price

Europe’s search for oil and gas alternatives

The move towards solar power is pressing with companies currently watching how things will unfold on the markets now the biggest single pipeline, Nord Stream 1, carrying Russian gas to Germany has halted for 10 days of maintenance. 

The war in Ukraine has left many countries, including those in the bloc, changing who they get their energy supplies from but it has not been an easy task. Liquified natural gas (LNG) from the US has helped Europe but it still needs more resources.

That’s because the void to fill is a big one – Russia currently supplies the bloc with around 45% of its natural gas – and around 25% of its oil, according to the European Commission. Percentages the EU wants to reduce – and quicky.

Brent Crude Oil spot price 

Markets in this article

BP.
BP - GBP
4.531 USD
0.024 +0.530%
SHEL
Shell - GBP
27.665 USD
0.145 +0.530%
RWE
RWE
33.325 USD
0.24 +0.730%
DQ
Daqo New Energy Corp.
16.90 USD
-0.86 -4.910%
ENPH
Enphase Energy, Inc.
117.00 USD
13.29 +12.840%

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