Homeowners considering solar energy should act fast — federal tax credits covering up to 30% of installation costs are set to expire on Dec. 31.
Anyone thinking of changing over to solar energy for their homes is seeing the window shut on that opportunity.
The tax credit created as part of the 2022 Inflation Reduction Act “allowed homeowners to upgrade their electric fuse boxes as well as put solar panels on their roof, and it was a sort of uncapped tax credit of up to 30%,” said Quentin Scott, federal policy director at the Chesapeake Climate Action Network.
He said the tax credit will expire Dec. 31.
For homeowners who were on the fence about converting to solar, “that really cut down their initial cost by one third, which was exciting,” Scott said.
But, Scott said, the passage of the legislation dubbed the “One Big Beautiful Bill” by President Donald Trump will phase out the tax credit by the end of the year.
So his advice to homeowners is to make the move — and fast.
“As long as they are able to get a contractor to start the work and complete that work before the end of this calendar year, they are able to file for this tax credit and get those discounts,” he said.
One caveat, Scott said, is that projects “have to be 100% completed and placed in service,” to qualify for the credit.
Scott said one impact of the expiration of incentives like the one for solar installation for homeowners is that “energy costs are going to go up because there’s less diverse energy being added to the grid.”
Another reason that homeowners would want to act quickly is the concern over potential delays in the supply chain, as well as the availability of contractors when it comes to scheduling and completing the work.
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The Turlock Irrigation District has completed a $20 million solar canopy over canals, marking a milestone in generating clean energy and promising water savings in the Central Valley city.”The Project Nexus—it is truly a pilot project. It is the first project of its kind in the state of California,” said Brandon McMillan from the Turlock Irrigation District.The project offers significant renewable energy benefits, serving both electricity needs and irrigation water on the canal side. McMillan said the potential reduction in evaporation is a key interest of the project. “It limits the light available for photosynthesis. So it could reduce the amount of aquatic weed growth, which is a major canal maintenance issue. It also saves land,” explained Brandi McKuin, a project scientist at UC Merced.However, the project faces challenges. “It’s more expensive to span a canal than it is to build a solar array on the ground, a ground-mounted system,” McKuin said. The team is working to quantify whether the benefits will outweigh the costs, considering water savings, reduced aquatic weed growth and land savings. “If we have less aquatic weed growth and if we don’t have to pay for land, does that make the system less expensive? And that’s what we’re working on quantifying now,” McKuin said.Researchers will gather data after a full season to assess the project’s results. Meanwhile, a prototype for a retractable solar canopy on rails is currently being shipped from Australia and is expected to be installed by late October.See more coverage of top California stories here | Download our app | Subscribe to our morning newsletter | Find us on YouTube here and subscribe to our channel
TURLOCK, Calif. —
The Turlock Irrigation District has completed a $20 million solar canopy over canals, marking a milestone in generating clean energy and promising water savings in the Central Valley city.
“The Project Nexus—it is truly a pilot project. It is the first project of its kind in the state of California,” said Brandon McMillan from the Turlock Irrigation District.
The project offers significant renewable energy benefits, serving both electricity needs and irrigation water on the canal side.
McMillan said the potential reduction in evaporation is a key interest of the project.
“It limits the light available for photosynthesis. So it could reduce the amount of aquatic weed growth, which is a major canal maintenance issue. It also saves land,” explained Brandi McKuin, a project scientist at UC Merced.
However, the project faces challenges.
“It’s more expensive to span a canal than it is to build a solar array on the ground, a ground-mounted system,” McKuin said.
The team is working to quantify whether the benefits will outweigh the costs, considering water savings, reduced aquatic weed growth and land savings.
“If we have less aquatic weed growth and if we don’t have to pay for land, does that make the system less expensive? And that’s what we’re working on quantifying now,” McKuin said.
Researchers will gather data after a full season to assess the project’s results. Meanwhile, a prototype for a retractable solar canopy on rails is currently being shipped from Australia and is expected to be installed by late October.
While most people who own solar panels opted to get them and knew what they’re getting into, some stumble upon them by chance.
One confused new homeowner reached out to the online community for help when they weren’t sure what their new solar purchase entailed.
“Just closed on a house with leased Sunrun,” said the original poster. “Owner bought out lease in escrow. I’m not sure what to do next. Advice?”
According to the original poster, the house is in Carlsbad, California. They had never owned solar panels before and weren’t sure how to maintain them, monitor their performance, or even what kind of documentation they needed for the array.
Despite their confusion, the original poster lucked out by getting a house with paid-off solar panels already installed. Solar is one of the best ways to save money on your home energy bill, not to mention the immense benefits for the environment it provides, since you’re producing clean energy right at home.
With the right setup, you can significantly reduce or even eliminate your power bill, paying back the cost of the solar panels and more over the system’s lifetime.
However, installing solar panels yourself is a sizable investment, and for some people, it’s too much to spend all at once. Leasing is a great middle ground that lets you access the benefits without the upfront costs.
If you think solar leasing might be for you, check out Palmetto’s LightReach solar leasing program.
If you want to make a purchase outright, look for your next installer and compare quotes through EnergySage’s free online tools. If you need help deciding between leasing through Palmetto and solar installation, consider this breakdown of the benefits.
Some people hesitate to install solar because they worry that it will be harder to sell their home with panels attached. But in reality, many buyers are seeking the peace of mind and lower bills that come with this home energy upgrade.
No matter how you slice it, it is a smart investment!
“Enjoy having your free electricity,” one commenter replied to the concerned Redditor.
Which of these factors is the biggest obstacle preventing you from getting solar panels?
Harpal Dagar has been farming under solar panels for five years [Harpal Dagar]
“As a farmer, you’re always at the mercy of weather,” says Harpal Dagar who has a farm on the outskirts of Delhi.
“So many times, we lost our produce due to unpredictable conditions,” he says.
But five years ago he was approached by Sun Master, a Delhi-based solar power firm, with a deal that would give him a much more predictable income.
Sun Master proposed building solar panels above some of Mr Dagar’s fields, with the panels high enough off the ground, that he could continue to farm underneath them.
Under the 25-year deal, Mr Dagar would receive annual payments and Sun Master would keep the proceeds from the electricity generated.
“When the solar company first approached us… many of us feared losing our land. It sounded too good to be true – maybe even a scam,” says Mr Dagar.
“But today, I believe it was the best decision I made. My income has tripled, and I sleep peacefully without the stress of climate or crop failure,” he says.
Sun Master pays him around $1,200 (£900) per acre, per year, plus $170 a month for work operating and maintaining the solar panels.
“Even the turmeric I grow on the same land is mine to sell. How can I complain?”
Siting solar panels above crops goes by the term agrivoltaics.
India would seem particularly suited to such innovation. The fortunes of many of its farmers often hinge on an unpredictable monsoon, so a reliable income from a solar energy firm might provide some welcome financial security.
But despite the benefits, take up has been slow, around 40 projects are operating in India at the moment, according to the National Solar Energy Federation of India (NSEFI), which represents India’s solar power industry.
There are several challenges.
Not all crops will grow under solar panels. Depending on the layout, the panels reduce the light getting through by between 15% and 30%. Some denser layouts will block too much sun for staple crops including wheat, rice, soybeans or pulses.
“What works well are high-value crops with moderate or low-light needs, like green leafy vegetables, spices such as turmeric and ginger, and some flowers,” says Vivek Saraf, the founder and CEO of Delhi-based SunSeed, which specialises in agrivoltaics.
There’s also the issue of expense.
To allow farming underneath, the solar panels need to be at least 11ft (3.5m) off the ground. That makes them between 20% and 30% more expensive to install than panels on a regular solar farm, where they are much closer to the ground.
“Small farmers cannot own these systems. They don’t have the risk appetite or capital,” says Mr Saraf.
SunSeed promises to take the risk out of farming [SunSeed APV]
The solar power companies want the government to step in with subsidies to make agrivoltaics more attractive.
“In India, where more than 55% of the population depends on agriculture and cultivable land is under mounting pressure, agrivoltaics offers a transformative model,” says Subrahmanyam Pulipaka, CEO of NSEFI.
“It reduces irrigation needs, shields crops from heat stress, and stabilizes incomes by diversifying revenue streams for farmers. For rain fed and climate-vulnerable regions, agrivoltaics can play a vital role in climate adaptation, making agriculture more resilient to unpredictable weather patterns,” he says.
SunSeed gives the farmer multiple options, including continuing to farm for a fixed salary, or handing over all the farming responsibility to SunSeed.
“Our model ensures the farmer is not exposed to any risk. If the crop fails or there’s a market issue, the loss is ours – not the farmers’,” he says.
Meanwhile, SunSeed has been finely tuning its system to work with different crops and conditions.
“We have developed sophisticated agrivoltaics simulation software,” he says.
“It digitally replicates panel configurations and crop types to simulate how much light and heat each leaf receives, how photosynthesis is affected, and ultimately how much yield to expect.”
Agrivoltaic projects are still relatively rare in India [SunSeed]
There’s still caution in government circles over the combination of solar power and farming.
“Agrivoltaics is promising, but we must protect both the farmer and the developer,” says Manu Srivastava, who oversees solar and agrivoltaic projects in the state of Madhya Pradesh.
“The biggest challenge is contracts. A 25-year lease needs clear obligations and protection for both sides. In India, long-term contract enforcement is still a hurdle,” says Mr Srivastava.
He also points out that agrivoltaics systems are more expensive than a traditional ground-mounted solar farm, so making a return on the investment is more challenging.
“If the farmer starts charging too much for land and the developer has to bear high structural costs, then it becomes unviable,” he says.
At the moment India is falling behind China, where more than 500 projects are in operation, according to the World Resources Institute.
“It’s a small beginning. But if the farmer’s economic interest is protected, if the right crops are chosen, and if contracts are clear and fair, there’s no reason India can not lead in agrivoltaics,” says Mr Srivastava.
Anand Jain has been growing strawberries and tomatoes under solar panels [Anand Jain]
Anand Jain comes from a family of farmers. He was growing medicinal herbs, but in 2024 he found a plot of land with no electricity.
“That’s when the idea clicked. Necessity is the mother of invention, and that’s how I began experimenting with agrivoltaics.”
Today he has 14 acres of farmland under solar panels. The farm has a total generation capacity of 4.5 megawatts, about the same as a medium-sized wind turbine.
Underneath he is still experimenting with crops, he hasn’t sold any at the market yet but says the quality is “promising”.
“I’ve had success with strawberries and tomatoes, although cauliflower didn’t work out as well.”
The project was funded with bank loans and support from the government, in all an investment of $2.27m.
“Let me be clear – agrivoltaics isn’t yet feasible for small farmers in India,” he says.
“This model will only succeed if there is a strong partnership between the government and the private sector.”
A coalition of advocacy groups has scored a major win to preserve a lucrative agreement that has increased property values for California homeowners who install solar panels.
EnergySage reported that the Golden State’s Senate Energy Committee has removed language from Assembly Bill 942 that would have nullified net-metering contracts if ownership changed on a solar-equipped home. In California, more than one million households have 20-year net-metering agreements, per the California Solar and Storage Association (CALSSA).
If the anti-solar language had remained in AB 942, buyers who bought a home with existing solar panels could have seen their electricity rates rise by as much as $63 per month, as reported by PV Magazine. In turn, the property values of those homes likely would have declined.
Fortunately, more than 100 environmental, clean energy, and consumer advocacy groups pushed back on AB 942’s original language, leading EnergySage to declare that “California solar homebuyers just dodged a $756-a-year bullet” that would have eroded consumer trust.
Installing solar panels has become a popular choice because it is one of the best ways to lower utility bills or even reduce them to $0.
EnergySage’s free tools have connected numerous solar customers with vetted installers, making it easy for them to compare quotes and save up to $10,000 on installations.
If you are interested in solar panels, installing them now could save you significant money in the long term. To qualify for the 30% solar tax credit, projects must be underway by Dec. 31 due to the passage of the One Big Beautiful Bill.
EnergySage’s handy mapping tool can also provide more insight into the average cost of solar in your state, as well as any additional incentives available in your jurisdiction.
Solar panels can also maximize your household savings on other energy-efficient equipment like heat pumps, which are capable of heating and cooling your home. However, the 30% tax credit on qualified heat pumps also ends Dec. 31. Mitsubishi is among the brands helping consumers find the right heat pump at an affordable price.
Meanwhile, EnergySage sees California’s move to protect solar buyers as a positive sign because it influences industry trends as the country’s largest residential solar market.
Weakening support for clean-energy projects in the Golden State could have set back efforts to improve electricity affordability elsewhere, as well as having ramifications for public health. Studies have linked pollution from dirty fuels to millions of premature deaths each year.
“By ensuring that these contracts are honored, the Senate Energy Committee and Chairman [Josh] Becker reinforced consumer trust, safeguarded clean energy investments, and sent a clear message that California stands by its commitments to climate action and energy innovation,” CALSSA executive director Brad Heavner said in a press release.
Join our free newsletter for easy tips to save more and waste less, and don’t miss this cool list of easy ways to help yourself while helping the planet.
The sight of solar panels installed on rooftops and large energy farms has become commonplace in many regions around the world. Even in the gray and rainy UK, solar power is becoming a major player in electricity generation.
This surge in solar is fueled by two key developments. First, scientists, engineers, and those in industry are learning how to make solar panels by the billions. Every fabrication step is meticulously optimized to produce them very cheaply. The second and most significant is the relentless increase in the panels’ power conversion efficiency—a measure of how much sunlight can be transformed into electricity.
The higher the efficiency of solar panels, the cheaper the electricity. This might make you wonder: Just how efficient can we expect solar energy to become? And will it make a dent in our energy bills?
Commercially available solar panels today convert about 20 to 22 percent of sunlight into electrical power. However, new research published in Nature has shown that future solar panels could reach efficiencies as high as 34 percent by exploiting a new technology called tandem solar cells. The research demonstrates a record power-conversion efficiency for tandem solar cells.
What Are Tandem Solar Cells?
Traditional solar cells are made using a single material to absorb sunlight. Currently, almost all solar panels are made from silicon—the same material at the core of microchips. While silicon is a mature and reliable material, its efficiency is limited to about 29 percent.
To overcome this limit, scientists have turned to tandem solar cells, which stack two solar materials on top of each other to capture more of the sun’s energy.
In the new Nature paper, a team of researchers at the energy giant LONGi has reported a new tandem solar cell that combines silicon and perovskite materials. Thanks to their improved sunlight harvesting, the new perovskite-silicon tandem has achieved a world record 33.89 percent efficiency.
Perovskite solar materials, which were discovered less than two decades ago, have emerged as the ideal complement to the established silicon technology. The secret lies in their light absorption tunability. Perovskite materials can capture high-energy blue light more efficiently than silicon.
In this way, energy losses are avoided and the total tandem efficiency increases. Other materials, called III-V semiconductors, have also been used in tandem cells and achieved higher efficiencies. The problem is they are hard to produce and expensive, so only small solar cells can be made in combination with focused light.
The scientific community is putting tremendous effort into perovskite solar cells. They have kept a phenomenal pace of development with efficiencies (for a single cell in the lab) rising from 14 percent to 26 percent in only 10 years. Such advances enabled their integration into ultra-high-efficiency tandem solar cells, demonstrating a pathway to scale photovoltaic technology to the trillions of watts the world needs to decarbonize our energy production.
The Cost of Solar Electricity
The new record-breaking tandem cells can capture an additional 60 percent of solar energy. This means fewer panels are needed to produce the same energy, reducing installation costs and the land (or roof area) required for solar farms.
It also means that power plant operators will generate solar energy at a higher profit. However, due to the way that electricity prices are set in the UK, consumers may never notice a difference in their electricity bills. The real difference comes when you consider rooftop solar installations where the area is constrained and the space has to be exploited effectively.
NEWPORT BEACH, Calif., September 10, 2024 (Newswire.com)
– ELECOM, a leading innovator in the field of personal computer peripherals, digital accessories, and eco-friendly technology solutions, proudly announces its latest sustainability and social responsibility initiatives, featuring the NESTOUT series of products.
Pioneering Sustainability at ELECOM
Under the leadership of Koichi Iwami, Chairman of Sustainability Committee, ELECOM has undergone a significant transformation in its approach to sustainability management. The company has made substantial strides in strengthening governance, managing risks, and engaging with employees to ensure business continuity and sustainable growth. These initiatives are vital for ELECOM’s mission to remain essential to society, its employees, and stakeholders.
NESTOUT Series: Eco-Friendly Energy Solutions
At the heart of ELECOM’s sustainability efforts is the NESTOUT series, a line of eco-friendly products designed to work seamlessly together to capture, store, and utilize energy efficiently. The NESTOUT series embodies the concept of a sustainable energy cycle:
Capturing Energy: NESTOUT solar panels harness the power of the sun, providing a renewable and clean energy source. These panels are designed to be highly efficient and portable, making them ideal for outdoor activities and off-grid adventures.
Storing Energy: The captured solar energy is stored in NESTOUT power banks, available in various capacities, including the newly launched 5000mAh version. These power banks are compact, lightweight, and perfect for travel, ensuring you have access to energy whenever and wherever you need it.
Using Energy: The stored energy can then be used through NESTOUT light accessories, which provide reliable and sustainable lighting solutions for any situation. From camping trips to emergency scenarios, NESTOUT lights ensure you are never left in the dark.
Commitment to a Decarbonized Society
ELECOM is committed to realizing a decarbonized society by reducing its carbon footprint and promoting eco-conscious products. The company has endorsed the United Nations Global Compact and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), aligning its efforts with global sustainability standards. Initiatives such as reducing CO2 emissions, managing waste, and promoting biodiversity are integral to ELECOM’s environmental strategy.
Social Responsibility and Community Engagement
ELECOM’s sustainability management extends beyond environmental concerns. The company is dedicated to supporting human rights, diversity, and inclusion within its workforce. ELECOM’s efforts in human resources development, occupational health and safety, and community engagement reflect its commitment to social responsibility. The company’s support for various local initiatives, such as tree planting and sports sponsorships, demonstrates its dedication to giving back to the community.
Looking Forward
ELECOM will continue to integrate sustainability into its business operations, aiming for long-term growth and societal contributions. The NESTOUT series represents a significant step towards achieving these goals by providing innovative, eco-friendly solutions that cater to modern energy needs.
For more information about ELECOM’s sustainability initiatives, please view the ELECOM 2023 Sustainability Report.
About ELECOM USA
Since 1986, ELECOM has been at the forefront of innovation in consumer electronics, earning a global reputation for its modern design and exceptional quality. The brand boasts over 150 Good Design Awards and 66 IF Design Awards, underscoring its dedication to excellence and innovation in the tech accessories market.
When a baseball-sized hailstone slams into a solar panel at more than 90 mph, the result is not pretty.
We saw this in March, when a hailstorm decimated parts of the 350-MW Fighting Jays solar project in southeast Texas. Images circulated on social media and in news coverage of thousands of panels pockmarked with white circles of broken glass. Right-wingoutlets were eager to amplify what they saw as evidence of the unreliability of solar power.
The reality about hail and solar panels is more complicated, and not so grim.
Solar developers and manufacturers have taken steps to reduce the risk from hailstorms, which involves a combination of sophisticated weather forecasting and panels that can turn to avoid direct hits. I recently spoke with some of the people doing this work.
First, let’s lay out the problem: Climate change is contributing to an increase in the severity of storms, including hailstorms.
At the same time, solar is the world’s fastest-growing electricity source, according to the International Energy Agency, and part of a mix of renewable sources that are on track to produce the majority of the world’s electricity by mid-century.
Right now, examples of hailstorms wrecking solar farms are rare enough that they’re still notable, like the one this year in southeast Texas and one last year in western Nebraska. But what about in 20 years, when hailstorms are likely going to be more severe and solar will cover much more ground?
There is no perfect method for protecting solar panels from hail, but there are ways to reduce the risk.
“There’s actual mitigation that can be done,” said Renny Vandewege, vice president of weather operations for DTN, the Minnesota-based company whose subscription-based products include weather forecasting for use by energy companies.
“We’ve patented the ability to measure the occurrence in the size of hail within radar technology,” he said. “Scanning the storms, you get feedback that says that a storm is producing hail two inches in diameter, or whatever the scenario.”
This data is most useful if a solar array has equipment that can respond to an approaching storm by adjusting the panel angle to reduce damage.
Nearly all utility-scale projects being built today use trackers, which are systems that turn the panels during the day to follow the sun. Some of those trackers have the capability to go into “stow” mode, which means they quickly turn to avoid a direct hit.
For example, Nextracker, the California-based manufacturer of solar tracking systems, sells a hail mitigation product that connects weather forecasts from DTN and others, and uses the data to adjust panel angles ahead of hailstorms. The systems are operated with software that can be used both on-site and remotely, and they have battery backups to function during power outages.
“Will solar continue to get developed and built in hail regions? The answer is yes,” said Greg Beardsworth, senior director of product marketing at Nextracker. “The way that will happen is through a combination of understanding the magnitude of the risk based on location, selecting the appropriate combination of module technology and tracker stowing capabilities.”
The Catholic University of America, along with Rockville-based solar energy company Standard Solar, unveiled the city’s largest, brand new 25-acre solar array located on the university’s West Campus on Monday.
Scott Wiater and Catholic University President Peter Kirpatrick at the solar array’s unveiling ceremony.(WTOP/Grace Newton)
Scott Wiater and Catholic University President Peter Kirpatrick at the solar array’s unveiling ceremony.(WTOP/Grace Newton)
The Catholic University of America, along with Rockville-based solar energy company Standard Solar, unveiled the city’s largest, brand-new, 25-acre solar array located on the university’s West Campus on Monday.
At the solar array’s unveiling ceremony, representatives from Catholic, Standard Solar and the Department of Energy spoke to community members.
“What’s unique about this array is the university gets to benefit from it, but also the community can subscribe,” Standard Solar President and CEO Scott Wiater said.
“We own the solar and we’re going to own and operate the solar for the long term. The university gets some of the electricity, and then some of the community members can subscribe and get the electricity at a discount to what they’d otherwise pay to the utility,” he added.
The previously undeveloped land will now hold 13,800 solar panels.
Wiater said the 42 rows of panels will produce 7.5 megawatts, which is equivalent to taking 1,500 cars off the road. They expect the solar array to be able to support around 1,200 households in the Northeast D.C. area.
Catholic University Executive Vice President Rob Spector said the project has been in the works for about four years. He said the university was looking for a way to make good and productive use of its West Campus area.
“It’s a tremendous amount of power generation. And it will help keep our costs down here at the university for energy, make productive use of this space and also keep this land in our possession for the long term, so that when we’re ready to expand the campus, we’ll have the opportunity to do so at our leisure,” Spector said.
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Solar power stocks fell hard in after-hours trading on Thursday following a
warning
from solar-equipment maker
SolarEdge Technologies that demand in Europe has slumped significantly.
Two things investors can be sure about: Nothing lasts forever and the stock market always overreacts. The spiking of yields on long-term U.S. Treasury securities has been breathtaking, and it has led to remarkable declines for some sectors and possible bargains for contrarian investors who can commit for the long term.
First we will show how the sectors of the S&P 500
have performed. Then we will look at price-to-earnings valuations for the sectors and compare them to long-term averages. Then we will screen the entire index for companies trading below their long-term forward P/E valuation averages and narrow the list to companies most favored by analysts.
Here are total returns, with dividends reinvested, for the 11 sectors of the S&P 500, with broad indexes below. The sectors are sorted by ascending total returns this year through Monday.
Returns for 2022 are also included, along with those since the end of 2021. Last year’s weakest sector, communications services, has been this year’s strongest performer. This sector includes Alphabet Inc. GOOGL
and Meta Platforms Inc. META,
which have returned 52% and 155% this year, respectively, but are still down since the end of 2021. To the right are returns for the past week and month through Monday.
On Monday, the S&P 500 Utilities sector had its worst one-day performance since 2020, with a 4.7% decline. Investors were reacting to the jump in long-term interest rates.
Here is a link to the U.S. Treasury Department’s summary of the daily yield curve across maturities for Treasury securities.
The yield on 10-year U.S. Treasury notes
jumped 10 basis points in only one day to 4.69% on Monday. A month earlier the 10-year yield was only 4.27%. Also on Monday, the yield on 20-year Treasury bonds
rose to 5.00% from 4.92% on Friday. It was up from 4.56% a month earlier.
The Treasury yield curve is still inverted, with 3-month T-bills
yielding 5.62% on Monday, but that was up only slightly from a month earlier. An inverted yield curve has traditionally signaled that bond investors expect a recession within a year and a lowering of interest rates by the Federal Reserve. Demand for bonds pushes their prices down. But the reverse has happened over recent days, with the selling of longer-term Treasury securities pushing yields up rapidly.
Another way to illustrate the phenomenon is to look at how the Federal Reserve has shifted the U.S. money supply. Odeon Capital analyst Dick Bove wrote in a note to clients on Friday that “the Federal Reserve has not deviated from its policy to defeat inflation by tightening monetary policy,” as it has shrunk its balance sheet (mostly Treasury securities) to $8.1 trillion from $9 trillion in March 2022. He added: “The M2 money supply was $21.8 trillion in March 2022; today it is $20.8 trillion. You cannot get tighter than these numbers indicate.”
Then on Tuesday, Bove illustrated the Fed’s tightening and the movement of the 10-year yield with two charts:
Odeon Capital Group, Bloomberg
Bove said he believes the bond market has gotten it wrong, with the inverted yield curve reflecting expectations of rate cuts next year. If he is correct, investors can expect longer-term yields to keep shooting up and a normalization of the yield curve.
This has set up a brutal environment for utility stocks, which are typically desired by investors who are seeking dividend income. In a market in which you can receive a yield of 5.5% with little risk over the short term, and in which you can lock in a long-term yield of about 5%, why take a risk in the stock market? And if you believe that the core inflation rate of 3.7% makes a 5% yield seem paltry, keep in mind that not all investors think the same way. Many worry less about the inflation rate because large components of official inflation calculations, such as home prices and car prices, don’t affect everyone every year.
We cannot know when this current selloff of longer-term bonds will end, or how much of an effect it will have on the stock market. But sharp declines in the stock market can set up attractive price points for investors looking to go in for the long haul.
Screening for lower valuations and high ratings
A combination of rising earnings estimates and price declines could shed light on potential buying opportunities, based on forward price-to-earnings ratios.
Let’s look at the sectors again, in the same order, this time to show their forward P/E ratios, based on weighted rolling 12-month consensus estimates for earnings per share among analysts polled by FactSet:
Sector or index
Current P/E to 5-year average
Current P/E to 10-year average
Current P/E to 15-year average
Forward P/E
5-year average P/E
10-year average P/E
15-year average P/E
Utilities
82%
86%
95%
14.99
18.30
17.40
15.82
Real Estate
76%
80%
81%
15.19
19.86
18.89
18.72
Consumer Staples
93%
96%
105%
18.61
19.92
19.30
17.64
Healthcare
103%
104%
115%
16.99
16.46
16.34
14.72
Financials
88%
92%
97%
12.90
14.65
14.08
13.26
Materials
100%
103%
111%
16.91
16.98
16.42
15.27
Industrials
88%
96%
105%
17.38
19.84
18.16
16.56
Energy
106%
63%
73%
11.78
11.17
18.80
16.23
Consumer Discretionary
79%
95%
109%
24.09
30.41
25.39
22.10
Information Technology
109%
130%
146%
24.20
22.17
18.55
16.54
Communication Services
86%
86%
94%
16.41
19.09
19.00
17.43
S&P 500
94%
101%
112%
17.94
19.01
17.76
16.04
DJ Industrial Average
93%
98%
107%
16.25
17.49
16.54
15.17
Nasdaq Composite Index
92%
102%
102%
24.62
26.71
24.18
24.18
Nasdaq-100 Index
97%
110%
126%
24.40
25.23
22.14
19.43
There is a limit to how many columns we can show in the table. The S&P 500’s forward P/E ratio is now 17.94, compared with 16.79 at the end of 2022 and 21.53 at the end of 2021. The benchmark index’s P/E is above its 10- and 15-year average levels but below the five-year average.
If we compare the current sector P/E numbers to 5-, 10- and 15-year averages, we can see that the current levels are below all three averages for four sectors: utilities, real estate, financials and communications services. The first three face obvious difficulties as they adjust to the rising-rate environment, while the real-estate sector reels from continuing low usage rates for office buildings, from the change in behavior brought about by the COVID-19 pandemic.
Your own opinions, along with the pricing for some sectors, might drive some investment choices.
A broader screen of the S&P 500 might point to companies for you to research further.
We narrowed the S&P 500 as follows:
Current forward P/E below 5-, 10- and 15-year average valuations. For stocks with negative earnings-per-share estimates for the next 12 months, there is no forward P/E ratio so they were excluded. For stocks listed for less than 15 years, we required at least a 5-year average P/E for comparison. This brought the list down to 138 companies.
“Buy” or equivalent ratings from at least two-thirds of analysts: 41 companies.
Here are the 20 companies that passed the screen, for which analysts’ price targets imply the highest upside potential over the next 12 months.
There is too much data for one table, so first we will show the P/E information:
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With the latest Energy Information Administration (EIA) report now out, we have a more precise look at renewable energy numbers throughout the United States, including the latest growth. Renewable energy investors and developers should already feel encouraged by the broad goal set for reaching 100% clean electricity by 2035.
But there are several important current trends worth keeping an eye on.
Renewables did well during the pandemic and are posed for more growth
The EIA reports that through October 2022, renewables grew to provide 22.60% of the total United States electrical energy generation. That included an impressive 14.26% growth compared to previous numbers from a similar timeframe in 2021 and a prediction that renewables will reach at least 25%.
This is good news for solar investors, not only because of the growth rates but because so many different sectors have contributed to it. Growth is coming from state programs and grants, more commercial applications than ever, and global trends pushing toward broader, more affordable solar energy.
Solar energy also has more room to grow than wind energy, which has seen similar growth rates but holds nearly 10% of the U.S. market compared to around 5% for solar energy, a gap that offers plenty of potential for future developments.
Where businesses will see the most growth this decade
What does the EIA report say about support for renewable energy growth in the coming decade? One crucial goal the EIA cites is reaching a global “net-zero” state by 2030. This means roughly 61% of the United States’ electricity will come from renewables. The EIA also provides several ideas on what kind of energy growth can get us there, which is a roadmap for potential high-growth areas in the coming years.
More grants for construction: Government investment in grants for builders and business owners interested in solar are likely to increase in the coming years. But there is a caveat: much of the support for these grants on a federal level currently comes from the Inflation Reduction Act (IRA). The House of Representatives is now in talks about managing the U.S. limit, and one of their demands is cutting many of the programs included in the IRA, which could affect energy investment across the board. If the IRA remains intact, it will be a vast boost for renewable construction. If it is significantly altered, grant programs may largely be left up to the states.
Heat pump growth:Heat pumps are one of the most underutilized traditional methods of saving energy and cutting out fuel use for the average home or business in the United States. State regulations, such as those passed by NY and others, will only encourage more adoption of heat pumps in the future. Owners will be happy to go along when the cost benefits compared to fuel become clear, and HVAC installers can expect growing interest over time.
Wind energy: While wind energy has narrower investment opportunities than other options — primarily wind farms — especially offshore building — I expect this sector to see significant future growth, including the Midwest and coastal states.
Targeted solar installations: Solar is more affordable than in years past and offers significant advantages for businesses, especially when it can capitalize on existing space while cutting costs. Two examples are parking lot installations (which also provide shade for cars) and additional rooftop installations on compatible commercial buildings, as well as new residential interest.
The growth of renewable energy now sees considerable pushback from utility companies, which see solar energy, in particular, as a threat to their profit models. Among other decisions, utility companies are lobbying state governments to retract programs meant to encourage solar construction and kill models that allow solar energy owners to benefit from the excess electricity they produce.
This war has already done immense damage in key solar markets in the United States, including California, where regulators have killed solar-related incentives, and Arizona, where utility companies backed a successful campaign to remove any benefits from rooftop solar and Florida, where utility companies are directly writing legislation and sending it to state congress to limit solar power.
The way forward here is unclear. A war between renewable energy and traditional utility companies yields only the worst results for end users, and governments caught up in shifting laws or regulations make the solar investment even more confusing for newcomers. This may be one of the most significant challenges moving forward from 2023.
Even during a year in which the S&P 500 index declined 19%, with 72% of its stocks in the red, there were plenty of winners.
Before showing you the list of the best performers in the benchmark index, let’s look at a preview: Here’s how the 11 sectors of the S&P 500 SPX, -0.25%
performed for the year:
Index
2022 price change
Forward P/E
Forward P/E as of Dec. 31, 2021
Energy
59.0%
9.7
11.1
Utilities
-1.4%
18.9
20.4
Consumer Staples
-3.2%
21.0
21.8
Health Care
-3.6%
17.6
17.2
Industrials
-7.1%
18.3
20.8
Financials
-12.4%
11.9
14.6
Materials
-14.1%
15.8
16.6
Real Estate
-28.4%
16.5
24.2
Information Technology
-28.9%
20.1
28.1
Consumer Discretionary
-37.6%
21.3
33.2
Communication Services
-40.4%
14.3
20.8
S&P 500
-19.4%
16.8
21.4
Source: FactSet
Maybe you aren’t surprised to see that the energy sector was the only one to increase during 2022. But it might surprise you to see that despite the sector’s weighted price increase of 59%, its forward price-to-earnings ratio declined and remains very low relative to all other sectors.
It might also surprise you that West Texas Intermediate crude oil CL.1, +2.69%
gave up most of its gains from earlier in the year:
FactSet
The reason investors are still confident in energy stocks is that oil producers have remained cautious when it comes to capital spending. They don’t want to increase supply enough to cause prices to crash, as they did in the run-up to the summer of 2014, after which prices fell steadily through early 2016, causing bankruptcies and consolidation in the industry.
Now the oil companies are focusing on maintaining supply, raising dividends and buying back shares, as Occidental Petroleum Corp.’s OXY, +1.14%
chief executive explained in a recent interview with Matt Peterson. Click here for more about Occidental and the long-term supply/demand outlook for oil.
Best-performing S&P 500 stocks of 2022
Here are the 20 stocks in the benchmark index that rose most during 2022, excluding dividends. Proving that there are always exceptions, not all of them are in the energy sector.
