Does the Invesco Solar ETF shine bright with the $370B climate bill?
This week, President Biden signed the landmark $750 billion Inflation Reduction Act — which includes $370B for clean energy with a major solar focus:
- A 30% tax credit for 7.5 million families to install solar on their roofs.
- A commitment of 950 million solar panels by 2030.
Solar’s big break: In 2013, solar stocks had a massive breakout year.
- After years of underperforming, the Invesco Solar ETF (NYSE:TAN) has risen 129% — far ahead of the S&P 500’s 32%.
- In an 18-month period between 2012-2013, the U.S. installed more solar equipment than in the last 30 years combined.
But solar has proven to be a volatile investment despite the exponential growth. Following 2013, $TAN had three years of negative returns while the S&P 500 went up each year, making you wonder, is $TAN worth a spot in your portfolio?
- Since the start of 2013: $TAN’s 506% return outperformed the S&P 500’s 250%.
- Since the start of 2014: $TAN’s 173% return underperformed the S&P 500’s 160%.
Timing matters: Investing in $TAN would have significantly underperformed if entered at the wrong time. And the wrong time seems to be right after strong years (2013 and 2020).
Still, there’s little dispute on solar’s importance and growth. With solar still only generating 2.8% of the U.S.’ electricity in 2021, there’s still significant room to grow.
The industry is now coming off a record $370B climate bill – the largest climate bill signed in history. Instead of asking if it’s the right investment, investors might be better off asking, “when is the right time?”