There's no question that solar energy is the fastest-growing source of new energy in the world today. It's coming down in cost and going up on everything from rooftops to deserts around the world.
Initially, the increased competitiveness of solar energy will disrupt coal, nuclear power, and natural gas in power markets, but long term that's only the start. As more vehicles are powered by electricity and more electricity is coming from solar energy, it makes sense that solar is indirectly replacing oil, especially if you're charging an electric vehicle (EV) at home with rooftop solar. We dug into the companies making that energy transition happen, and Sunrun (NASDAQ:RUN), SolarEdge (NASDAQ:SEDG), and Blink Charging (NASDAQ:BLNK) are the three stocks three of our Motley Fool contributors see as the solar energy stocks disrupting oil right now.
Solar is the "new king"
Howard Smith (Sunrun): Sunrun, the nation's leading provider of residential solar and related energy services, just got bigger. The company completed the acquisition of Vivint Solar last week, giving it a base of more than 500,000 customers.
The combined companies have an enterprise value of approximately $22 billion, and are a step closer to moving electricity generation to the home and away from fossil fuel-powered plants. The company's products "have already and will continue to help shut down inefficient carbon-producing power plants," Sunrun co-founder and Chief Executive Officer Lynn Jurich said in a statement on the acquisition.
Company executives aren't the only ones touting the growth of solar power at the expense of fossil fuels. In a new release by the International Energy Agency (IEA), an autonomous global organization for the industry, Executive Director Dr. Fatih Birol said solar has become "the new king of electricity."
The agency just updated its world-energy outlook for October, and it provided four possible scenarios for how the world's emergence from the COVID-19 pandemic should affect energy production and demand. "Renewables grow rapidly in all our scenarios, with solar at the center of this new constellation of electricity generation technologies," the report said.
Investors looking to benefit from that trend have already noticed the growth at Sunrun. Revenue has almost tripled since 2016, and the combination with Vivint Solar will only boost that growth. The share price, in turn, has also risen, with the vast majority of the gains realized in a 360% gain since the start of 2020.
But a recent pullback of nearly 20% from its highs may mark a good time to invest in the longer-term storyline. Fossil fuels may not quite be obsolete, but the trend in solar generation is under way. Sunrun is a good way to invest in the residential side of that growth.
Helping solar beat Big Oil everywhere
Jason Hall (SolarEdge): Solar power is mostly disrupting coal and natural gas in power generation. But the growth of electric vehicles around the world is impacting Big Oil where it matters most -- in the use of oil as a transportation fuel. SolarEdge is positioned to profit from the growth of renewable energy across the value chain.
The company's biggest business today is module-level power electronics that connect solar panels to the grid. Since going public just over five years ago, sales have increased more than 600%:
And going forward, the solar business will remain important. But it's not going to be the only source of growth for SolarEdge. Over the past several years, management has taken action to expand the company beyond its core business, and SolarEdge now sports electric vehicle chargers and the manufacture of electric vehicle powertrain components.
The growth of demand for electric vehicles is expected to last for decades, and automakers are looking for trusted suppliers they can count on. With a long history as a reliable partner to solar panel makers and installers, SolarEdge's new business segments could go a long way toward taking away Big Oil's most important source of revenue: automobiles.
Charging up the end of oil
Travis Hoium (Blink Charging): I'm going to go a little adjacent to solar energy with this pick, but Blink Charging is related to the solar industry in more ways than you might think. The picks Howard and Jason made are all about producing solar power and turning it into a usable form of energy. Blink Charging is about completing the cycle and getting renewable power into vehicles through a nationwide EV charging network.
Blink Charging has built or deployed 23,000 EV charging stations and is growing its network at a rapid pace even during the pandemic. Between June and August, the company sold or installed 539 EV chargers, up nearly 100% versus a year ago. Growing the base of chargers gives the company more potential points of contact with users, who are growing in numbers as electric vehicle sales pick up.
The tie to solar energy is that the charger is what ends up making oil obsolete. I recently got a quote for solar panels on my roof; my family could not only make enough solar power on our roof to replace electricity from the grid, but we could also add at least one and maybe two electric vehicles and provide enough power for them at home. Solar energy on my roof could literally replace trips to the gas station, but a charger is necessary to make that happen. And Blink Charging is one of the companies making charging possible from homes to businesses to public charging networks.
If you look at oil stocks today, they're down because investors see this disruption coming. Wind and solar energy get cheap enough to compete with fossil fuels, then electric vehicles become cost-competitive with traditional vehicles, and then the gas station is replaced by EV charging stations. Disruption of oil consumption is coming, and companies like Blink Charging are making that disruption possible.
The solar ecosystem is what matters
You can see here that the companies we picked play in different parts of the solar and electric vehicle market, and that's the way the industry works today. From producing solar power (Sunrun) to getting it into electric vehicles (Blink Charging) to making electric vehicle components (SolarEdge), solar energy is disrupting oil and has decades of room to grow as it replaces our traditional vehicle market.