SunEdison is a major player in the solar energy market—the U.S.-based company is involved in both the manufacture and installation of solar power, in addition to its operation—and it’s having a downright dismal year. Its share prices are down below $2, and it’s now being forced to shed holdings in an attempt to find firmer financial ground. Katie Fehrenbacher writes for Fortune:
SunEdison is also now desperately cutting costs and slashing some of the divisions that once made it highly valued. Earlier in the month SunEdison sold off its Japanese solar arm to a Thai oil company.
Now it’s continuing its slash and burn strategy to stay afloat. But with a handful of lawsuits pending, and a stock price below $2 per share, how much runway does SunEdison have before it reaches the end of the cliff?
SunEdison isn’t the only solar company struggling, either. SolarCity, the solar firm Elon Musk helped create, saw its stocks fall to a three-year low earlier this week, while a leading solar stock index has fallen more than 27 percent so far this year. Some of this can be put down to the fall in global oil prices, because while solar energy and petroleum products don’t directly compete with one another, bargain crude can throw the costs of subsidizing renewables in sharper relief for policymakers.
Some of it can also be put down to uncertainty over net metering, a term that describes the ability of solar producers to sell the excess power they produce back to the grid, at the state level. This arrangement favors solar producers and strains utilities and grid operators; utilities argue that net metering adds to their own costs while threatening the stability of grids that weren’t designed to send power in two directions. And in many states (most recently Nevada), these net metering deals are being reworked. These changes alter the underlying economic calculus for many solar producers, which is why investors are understandably spooked.
This is a distorted market. Until solar technology advances far enough to be able to compete with fossil fuels on its own merits, and, maybe more importantly, an energy storage option emerges that allows solar producers consistently to contribute power, this industry will remain one that’s reliant on government largesse. Due both to cheap oil and to the strain that net metering puts on grids, policymakers are finding it harder to justify supporting solar—and the stock market is showing it.