How we turn the lights on in our home has come a significantly long way since Thomas Edison invented the lightbulb in 1879. And so has all the other infrastructure that keeps a household running, for that matter! In 1925, only half of U.S. homes used electric power. By 2019, one in four U.S. homes had gone completely electric – including heating and cooking.
As for how that electricity is generated, it’s still mostly by fossil fuels (natural gas, coal and oil): 62.7% as of 2019. However, that trend is shifting, with renewable energy taking the lead.
The chart below shows how, for the first time in over 130 years, U.S. renewable energy consumption has topped coal. Not only has coal taken a steep dive, but renewables are on a sharp uptrend. In fact, in just the next 15 years the U.S. could hit 90% clean energy.
Source: U.S. Energy Information Administration (EIA)
The reality is U.S. renewable energy is becoming cheaper. Installation costs have fallen more than 70% over the last 10 years. Even better: Prices should stay low, with wholesale costs falling 10%. That’s a lot more peace of mind than fossil fuels give us, where we can see oil prices oscillate anywhere from near $0 to $100 and back again.
Now, in regards to investment opportunities, I’m most interested in the solar energy power space. According to the U.S. Energy Information Administration (EIA), solar power jumped nearly 15% year-over-year in 2019. Photovoltaic (PV) capacity increased 15.9%. Looking forward, solar energy is expected to vastly outpace the expansion of all other alternative energy sources over the next 30 years.
Currently, the U.S. has about 77 gigawatts of solar PV capacity, or enough solar energy to power 14.5 million homes. But that only accounts for about 2.6% of total U.S. electricity generation last year—and to me, that spells opportunity.
California is the largest solar market in the U.S., with more than 27,000 megawatts of solar PV capacity. That’s almost five times more than the No. 2 state for solar PV capacity, North Carolina. The reason why the Golden State is leading the solar charge is simple…
Back in 2006, the California Global Warming Solutions Act was enacted and called for an aggressive reduction in greenhouse gases. Since then, California has continued its efforts to utilize more renewable energy resources. In fact, one of California’s solar mandates, the one requiring all newly single- and multi-family constructed homes (up to three stories) to be built with solar panels, went into effect on January 1.
California is looking to have at least 60% of all electricity be generated by non-carbon-producing sources by 2030 and 100% by 2045. With its population of nearly 40 million, clearly, California’s clean energy initiatives are shaping up to be a boon for the solar industry. And that alone is causing my favorite solar stocks to rocket higher.
Right now, solar homes are mandated in California for new home construction, and electricity is typically sold back to the electricity grid at very low rates. But with the California electricity grid no longer reliable during fire season, more businesses and homeowners are looking to store their electricity in backup systems. These backup systems are also vital for electric vehicles in California and in other major solar markets.
My Top Solar Play
With that mind, the solar stock on the top of my list is Enphase Energy, Inc. (ENPH), a solar energy company that was founded in 2006.
Within five years of the company’s founding, Enphase Energy had developed and introduced the first microinverter system. Simply put, microinverters sit underneath solar panels and convert all the sunshine to actual electricity for homes and businesses. So, they’re vital to the solar energy industry.
By September 2011, Enphase Energy had shipped one million microinverters. Today, Enphase Energy operates in 21 countries around the world, has more than 300 issued patents and has shipped millions of microinverters globally. The company now has more than 6.5 gigawatts DC of Enphase-based systems installed in 130 countries.
Enphase Energy is benefiting immensely from California’s solar mandate and the booming solar industry as a whole, which was evident in the company’s recent earnings report.
During the first quarter, Enphase Energy shipped more than two million microinverters. The company has now shipped a total of more than 27 million microinverters.
Strong demand for the company’s microinverters has certainly added to its top and bottom lines. Enphase Energy reported that first-quarter revenue surged 105% year-over-year to $205.5 million, while earnings of $0.39 per share were up 387.5% year-over-year! The consensus estimate called for earnings of $0.33 per share, so ENPH posted an 18.2% earnings surprise.
The stock has been on fire this year. It’s up more than 80% year-to-date. Meanwhile, the S&P 500 is still negative for the year. Its strength isn’t surprising, given its strong fundamentals and growth potential.
Since I added ENPH to my Breakthrough Stocks Buy List back in November 2019, it’s now sitting pretty with a 164% return. I was so impressed with the fundamentals that I later added it to my Platinum Growth Club Model Portfolio in January of this year and made it one of one my Top Stocks for June.
The bottom line: There’s huge potential in the solar energy industry, ENPH has exceptionally strong fundamentals, and as an added bonus, it’s the number-one holding in the iShares Global Clean Energy ETF (ICLN). This means it should get an extra boost from institutional buying pressure. In light of all this, ENPH is set to really shine over the long term.
ENPH isn’t the only fundamentally superior stock I like right now. All told, I have 44 other stocks in my Platinum Growth Club Model Portfolio and over 100 stocks in all my services combined. These stocks are the crème de la crème and are set to move higher in the coming weeks and months. Click here for a free briefing on my Platinum Growth Club Model Portfolio and why you should try us (risk-free!) today.