The coming year is not looking very promising for energy. Oil prices are slumping and look like they will continue to underperform for at least the first half of 2016. Natural gas, if anything, looks worse. Can we find anything in the energy space to interest our investment dollars in the first half of 2016?
One sub-sector looks primed to do better in the coming year: Solar stocks.
Normally, I believe the renewable sector of energy can only do well when oil stocks are doing well. Why? Because despite all our good wishes to have renewable energy replace fossil fuels whenever it can, wind, geothermal and solar energy are still not competitive with oil, coal and gas -- and particularly not as oil hovers below $40 a barrel and natural gas near $2/mcf.
But incentives to increase the global exposure of alternatives and particularly solar power continue to grow and despite its relative inefficiencies, we will continue to see a steady double-digit growth of solar electric generation for 2016 and beyond.
Two recent events make that growth even more sure: The Paris climate accord just signed, and the US Congress extension of renewable tax-credits through 2020.
The agreed carbon targets of the Paris accord were not universal, with each of the 160 countries and particularly the big three of Russia, China and the U.S. contributing their own reduction schedules. Nothing that was in the Paris accord represented a new proposal, nor are they likely to result in a less than 2 degree warming in the climate, the professed goal of the gathering. Still, the collective agreement represents a continued global commitment to increasing dependence upon renewables in the coming decade, despite lower conventional energy prices.