What happened 

Shares of solar installer Vivint Solar Inc (NYSE:VSLR) fell 13% in February, according to data provided by S&P Global Market Intelligence, as investors worried about the future of residential solar. In just the last two months, tariffs and raising interest rates have hit the industry and could make it harder to make money. 

So what 

Tariffs hit solar panel imports in January, so there may have been a hangover effect on Vivint Solar, but the bigger thing investors were looking at was continually rising interest rates. In just a little over two months of 2018, the 10-year Treasury rate has risen from under 2.5% to nearly 2.9%, which will lower the value of every contract Vivint Solar has on its balance sheet. 

Worker inspecting a rooftop solar installation.

Image source: Getty Images.

Another factor investors are looking at is the sale of solar assets like 8point3 Energy Partners (NASDAQ:CAFD) and NRG Yield (NYSE:CWEN), which both fetched fairly low values on the market. If solar developers aren't able to get top dollar for the assets they have, it effectively lowers the value of the underlying projects and a company like Vivint Solar. 

Now what 

The good news for Vivint Solar is that it's moving away from the leasing model to more solar system sales, which will offload the interest rate risk to customers. But there's no denying that Vivint Solar's projects don't have the same value they did a few months ago when interest rates were lower. If the company can generate a profit from the sale of solar systems, it'll reduce risk, but for now, the lower value of assets on the balance sheet isn't pleasing investors. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.