Why Solar Stocks Were Big Winners on Wednesday

An underdog sector if ever there was one, solar energy was hot on the stock market on Hump Day. Many solar titles saw big price increases on the day, with Sunrun (RUN 16.14%) closing 16% higher and peer Sunpower (SPWR 15.26%) close behind with a 15% gain. Sunnova Energy (NOVA 7.37%) posted a more-than-respectable 7% increase, while components supplier SolarEdge Technologies (SEDG 9.87%) rose just short of 10%.

The companies and their stockholders have a top U.S. government official to thank for those gains.

Cheaper Chinese goods remain a problem

That person is Treasury Secretary Janet Yellen, who on Wednesday essentially accused China of flooding the global market with very competitively priced green energy products, such as solar components.

In a speech at the offices of privately held solar company Suniva, Yellen said that the massive Asian country’s “overcapacity distorts global prices and production patterns and hurts American firms and workers, as well as firms and workers around the world.”

The country has massive industries cranking out goods used for a wide range of eco-friendly uses. In addition to solar, it is very active in the electric vehicle space, and it produces high numbers of lithium-ion batteries. It actively sells such products at competitive prices throughout the world, hence the perceived threat to U.S. manufacturers.

Yellen added that she will exert pressure on Chinese authorities about such practices in an upcoming official visit to the country. While she said she would “take the necessary steps,” she wasn’t more specific.

The Biden Administration is assertively trying to develop clean energy as a sizable economic sector. It is pouring federal money into the effort with a series of measures baked into the large-scale Inflation Reduction Act passed in 2022, among other initiatives.

A chance to improve the situation

The U.S. solar industry has been affected by this for years, of course, so it was little wonder that Sunrun, Sunpower, and many of their peers saw stock price gains on Yellen’s pledge to tighten the screws. However, talk is cheap, and the real difference will come when and if the U.S. gets the Chinese government to retreat in some way.

Given that, solar investors should keep a sharp eye on how Yellen’s talks with that country’s officials go during the upcoming visit. The U.S. has some leverage to work with, as it remains a top consumer of all manner of Chinese goods; we’ll see how effective our government is in using that advantage.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends SolarEdge Technologies. The Motley Fool has a disclosure policy.

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