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Economy

Another Bad Day for the Renewables Industry

The bad news keeps piling up.

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Broken solar panels.
Heatmap Illustration/Getty Images

It’s another bad day for the renewable energy business.

The ill tidings started early Friday morning with SolarEdge, a company that primarily sells inverters, which convert the electricity produced by a solar panel into the kind that can be used in homes.

In an unexpected announcement, SolarEdge’s chief executive Zvi Lando said that, in the third quarter, the company had “experienced substantial unexpected cancellations and pushouts of existing backlog from our European distributors.” Many of its core financial metrics, including revenue and operating income, would fall below the low end of the range it had projected earlier, SolarEdge warned. The company also said it expected “significantly lower revenues in the fourth quarter.” (SolarEdge is based in Israel but the company said that the Hamas-Israel war was not related to their financial troubles.)

Investors promptly panicked, selling off the stock and sending it down 27% in trading Friday afternoon.

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Other solar stocks were also down. Enphase, another solar services and inverter company, tumbled 14%. Sunrun, a residential solar systems company (which means it actually installs panels), was down 6%. Shares in SunPower, a competitor to Sunrun, were down around 9%.

With today’s trading, SolarEdge has fallen more than 70% in the past year. And those other companies aren’t too far behind — they’re all down around 50% to 67% on the year.

The worry is that the problems SolarEdge identified are not unique to the company itself or even the inverter business, but to the solar industry as a whole.

The company said that its European business had both a pileup of inventory and “slower than expected installation rates,” specifically “at the end of the summer and in September where traditionally there is a rise in installation rates.”

In a note to clients earlier this week, Citi analyst Vikram Bagri noted that downloads of solar apps in Europe, which can be used as a proxy for sales, “declined sequentially … in September, we typically observe sequential acceleration in downloads exiting the seasonally slower August period.”

But Friday’s troubles were not restricted to solar.

In New York, the offshore wind business took another hit from the state government. Governor Kathy Hochul, a Democrat, vetoed a bill passed this summer which would have kickstarted the regulatory process necessary to connect a transmission cable from the planned Empire Wind 2 project on the south shore of Long Island to a substation in Island Park, which is just slightly inland.

In her veto message, Hochul said that the onus was on Empire Wind 2’s developer, Equinor, and other companies in the offshore wind business “to cultivate and maintain strong ties to their host communities throughout the planning, siting, and operation of all large-scale projects,” adding that the Long Beach city council did not support using the beach for the project.

Wind projects are no stranger to local opposition — hostility to such projects on land actually increased between 2000 and 2016. Proponents of offshore wind thought that they could avoid this type of local opposition because the planned projects are out to sea, typically out of sight from residents, but the infrastructure necessary to bring the power generated offshore to homes and businesses still requires building transmission cables and substations on land.

The planned Empire Wind 2 would have 1,260 megawatts of capacity to serve downstate New York, the most populous region of the state and one that depends largely on fossil fuels for electricity generation. State law mandates that New York as a whole generate 70 percent of its electricity by 2030, but that goal will be imperiled if renewable energy projects aren’t built to serve the New York City area.

“The veto of ‘The Planned Offshore Wind Transmission Act’ undermines New York’s commitment to the energy transition and the role offshore wind must play in achieving the state’s renewable energy mandates. This decision sends another troubling signal to renewable energy developers following last week’s action by the New York State Public Service Commission,” Molly Morris, the president of Equinor Renewables America, told me in an emailed statement.

Hochul’s veto came a week after the state’s utility regulator refused to adjust contracts for renewable projects, including four offshore wind projects, after companies saw much higher costs than expected.

And those higher costs aren’t just in offshore wind. The entire renewables sector is in trouble, at least for now.

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