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Southern states lead 2019's stock market solar rally

Illustration of the United States with solar panels clustered around the southern states.
Illustration: Aïda Amer/Axios

Solar panels? For investors in solar power stocks and ETFs so far this year, it's been more like solar profits.

What's happening: Invesco's solar ETF, up 51% year-to-date, has returned about four times the S&P 500's gain for 2019 and has even delivered almost double the average return of other clean energy ETFs, after a tough 2018.

  • Individual solar companies are charging even higher, as companies like Sunrun (77%), SolarEdge (71%) and SunPower (107%) generate particularly outsize returns.

"Things look a lot better so far this year," Tom Heggarty, senior analyst at Wood Mackenzie Power & Renewables (WoodMac), tells Axios. "I suspect stocks are doing better because the industry is expected to grow significantly."

By the numbers: A new report from WoodMac and the Solar Energy Industries Association (SEIA) finds that Q1 saw U.S. solar installations (combined utility-scale, residential, commercial and more) rise 10% versus the same period in 2018.

  • The 2.7 gigawatts of solar PV (panels that convert sunlight into electricity) installed made it the best Q1 ever, though other quarters have seen higher growth, and it was a 37% drop from Q4.
  • Analysts expect installed U.S. PV capacity to more than double over the next 5 years.
  • The survey forecasts 25% growth in 2019 compared with 2018.
  • The U.S. solar market saw more than 2 million installations, 3 years after the market surpassed 1 million installations. The industry is expected to hit 3 million installations in 2021 and 4 million installations in 2023.

The intrigue: Solar stock prices have outpaced other renewable energy options thanks to major pickups in residential installation of solar panels, particularly in the South. The uptick has come from states like Florida and Texas, so-called emerging markets in the industry, that are now beginning to see a changing regulatory environment pay dividends.

  • Maryland recently removed a cap on the amount of energy that solar system owners can exchange on the grid and passed a bill requiring the state to generate 50% of its electricity from renewable energy by 2030.
  • Almost a third of new residential capacity in Q1 came from states outside the top 10 markets in cumulative capacity, the highest share ever, data from SEIA report shows.

Yes, but: Non-residential installations fell to the lowest quarterly level since Q1 2017, dropping for a second year in a row. The report suggests policy shifts in states like California, Massachusetts and Minnesota may be stifling commercial growth.

  • The report does project non-residential installations will pick up again in 2020.
Data: Investing.com; Chart: Axios Visuals

The big picture: "The first quarter reflected bit of a rebound for rooftop solar, and perhaps more importantly the amount of corporate investment in solar by companies such as Anheuser Busch, Starbucks, Facebook, Target, Walmart and many others," SEIA spokesman Dan Whitten tells Axios in an email.

  • Anheuser-Busch recently announced a 15-year virtual power-purchase agreement with Recurrent Energy for a 222-megawatt (AC) project in West Texas as part of its pledge to purchase 100% renewable electricity by 2025. It also has projects in New York and Oklahoma.
  • Starbucks in April unveiled a partnership with U.S. solar developer Cypress Creek on 8 Texas solar projects that will provide energy to 360 stores across the state.

Go deeper: Solar energy use is on the rise worldwide