High oil prices "fuel" renewable energy; U.S. solar stocks are "showing impressive gains."

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Turbulence in the energy market is rekindling investors' enthusiasm for the renewable energy sector.

Boosted by rising global oil and gas prices and the impact of the Hormuz crisis, solar stocks have surged significantly this year, and the market is replaying the "renewable energy trading logic" last seen during the 2022 energy shock.

SolarEdge’s cumulative rise in U.S. stocks has reached 64% since the beginning of the year, with its performance closely mirroring Brent crude and European natural gas benchmark prices. Goldman Sachs analyst Adam Wijaya raised a question to clients in a report released this week: "Are we repeating the script of 2022?" He pointed out the recent price movements in the residential solar sector "indeed look that way."

The core logic behind this round of gains is: Higher fossil fuel prices directly improve the economics of alternative energy, prompting the market to re-evaluate the allocation value of solar and wind energy. Meanwhile, some grid operators have turned to coal to ensure stable power supply, further sparking policy discussions about expanding renewable energy capacity and optimizing grid structure.

Notable divergence among individual stocks, SolarEdge leads

Adam Wijaya detailed the divergence within the sector in his report. SolarEdge is up 79% since the start of the year, Enphase Energy is up 18%, while Sunrun is down 32%. He noted that with oil and gas prices rising across Europe and around the globe, combined with the coal substitution effect entering the market's focus, the market is starting to ask: "Will the EU accelerate the expansion of renewables due to energy demand pressure?"

The synchronized performance of SolarEdge stock with Brent crude and European natural gas prices validates the market's acceptance of this trading logic—the higher fossil fuel prices are, the stronger the relative competitiveness of renewables, and the earnings expectations of related companies are also improved accordingly.

Hormuz crisis reshaping energy security narrative

The revival of renewable energy trading this round is closely linked to the reassessment of energy security triggered by the Hormuz crisis. The crisis has forced multiple countries to re-examine the fragility of their energy supply chains, with some grid operators already turning to coal to maintain a stable supply of electricity. However, while this is a short-term emergency measure, it also ushers in longer-term discussions—how to expand solar and wind installations to diversify the grid's energy structure and reduce reliance on a single fossil fuel.

Aside from the fundamental logic of energy, policy expectations have also become a variable of concern for some professional investors. Adam Wijaya mentioned in his report that as the U.S. midterm elections approach, some experts have begun to discuss the so-called "blue script"—that is, which stocks might show greater flexibility in the scenario of an energy policy shift, prioritizing support for solar, wind, and renewable energy.

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