Renewable Stocks Fall After Hopes For Democratic Senate Dim

(Bloomberg) -- Shares of renewable energy companies tumbled Wednesday as the U.S. presidential election remained too close to call and hopes dimmed that Democrats would take control of the Senate.

A Bloomberg Intelligence index of large solar companies dropped as much as 4.9%, the most during intraday trading since March, as Republicans appear poised to retain a slim Senate majority. The WilderHill Clean Energy Index fell as much as 5.1%.

“There was some anticipation of a Democratic sweep and the possibility of major climate reform,” Raymond James analyst Pavel Molchanov said in an interview. Even if Democratic nominee Joe Biden wins, without a Democratic Senate “he’ll have to rely on executive action, tinkering around the edges, rather than anything game-changing or transformative.”

Top U.S. residential installer Sunrun Inc. dropped as much as 8.9%, and was down 1.9% to $53 at 11:58 a.m. in New York.First Solar Inc., the biggest U.S. panel maker, fell as much as 11% and SunPower Corp. fell as much as 14%.Clean energy giant NextEra Energy Inc., the world’s biggest producer of wind and solar electricity, slipped as much as 4%.In Europe, Vestas Wind Systems A/S, the world’s top wind-turbine producer, slumped the most in three years before paring the losses.

With votes still being counted in key battleground states, it’s unclear if the U.S. will more aggressively shift toward green energy, as Biden has pledged -- or if President Donald Trump will get four more years to promote fossil fuels.

“Even in the event that Biden wins the election, we think the prospects of the solar industry look much less favorable given a lower probability of an extension of the investment tax credit,” said Angelo Zino, an analyst at CFRA, in a research note. CFRA downgraded SunPower and manufacturer Canadian Solar Inc. to hold from buy.

While investors may be spooked by the uncertainty, it’s unlikely a second Trump term would significantly thwart the growth of wind and solar power. Demand for clean power has increased throughout the Republican’s presidency, thanks to state-level policies, corporations pushing to go green and a growing appetite for environmental, social and governance, or ESG, investments.

(Updates with analyst quote in penultimate paragraph. A previous version corrected the size of index decline in second paragraph.)

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