Business Insider
It's time for solar's moment in the sun.
During the recent debate, both Vice President Kamala Harris and former President Donald Trump expressed their support for solar energy. Trump said he was a "big fan" of solar power, and Harris doubled down on her support for clean energy.
To some market experts, this is simply the latest of many indicators of an energy transition — and also a massive investment opportunity.
Structural shifts in the energy market have been underway for decades, according to PGIM. The use of zero-carbon energy sources has increased by 35% since 2005.
Graeme Baker, a portfolio manager at the asset management firm Ninety One and its Global Environment strategy, believes that solar and other renewable energy usage will only increase as clean energy becomes cheaper.
The price tag for renewables has dramatically dropped in recent years, with the costs of new solar and wind plants falling over 75% in the last decade, according to Baker. And as the technology continues to scale, it'll only become even more efficient and less expensive.
Solar power and other renewable energy sources are set to become massive beneficiaries of secular tailwinds in the energy sector, according to Baker.
After the last two decades of essentially flat growth, power demand is estimated to surge by 40% for the next two, largely thanks to increased energy demands from AI. While traditional utilities providers will certainly benefit, Baker also sees an outsize opportunity for renewable energy providers.
Baker points out that Big Tech names such as Amazon and Microsoft have strayed from their net-zero targets largely due to increased power demand from AI. Baker believes this adds to the demand for efficient solar and renewable energy sources, as Big Tech will need more decarbonization solutions to meet its clean power needs.
"That means effectively, more clean tech, more renewables, so it could create significant multiples in terms of structural growth," Baker said.
After a strong debate performance, Wall Street is getting more confident of a Harris presidency.
"We are tipping into the view that Kamala Harris is going to win this," David Bianco, head of US equity strategy at DWS, said.
Should Harris win, she'll likely continue supporting the policies put forth under the Biden administration, such as the Inflation Reduction Act (IRA), which provides billions of dollars in subsidies to clean energy sources. Harris also has a track record of supporting renewable energy initiatives, backing a resolution for a Green New Deal in 2019.
Trump caveated his support of solar power, saying that solar plants take up "400, 500 acres of desert soil." He's voiced his support for oil and rolling back parts of the IRA.
In Baker's opinion, the future of solar and clean energy is less reliant on who's in the White House this November than investors might expect.
"I think policy is important for some of these key areas, but I would reiterate the point that the economics and technology are also very important. If you have a form of power that is cheaper than the next best thing and provides jobs and infrastructure spend, then I believe in any environment that should still work well as a good growth and investment opportunity," Baker said.
For investors interested in increasing their exposure to solar energy solutions, Baker shares the following 4 investments. These companies provide solar power offerings across the entire renewable energy value chain. They are all constituents of Ninety One's Global Environment Fund (ZGEIX).
