Latest / Energy Economics with Fexingo: Oil Prices, Renewables, and the Cost of Power / Enphase Energy Surges 27 Percent as Solar Stocks Rally
Transcript
- Lucas: So oil is getting hammered this week — WTI crude down nearly 12 percent in five days, settling around $95.84 a barrel as of this afternoon. And yet, if you look at the clean-energy side of things, it's a completely different story. Luna: Yeah, I noticed that. The Invesco Solar ETF, ticker T-A-N, is up about 5 percent this week. And Enphase Energy — that's up over 27 percent. Lucas: Twenty-seven percent in five days. That's not a green tick, that's a statement. Enphase, ticker e n p h, closed around $63.21 today. First Solar, ticker f s l r, up over 9 percent. The iShares Global Clean Energy ETF, i c l n, up 5 percent. Luna: Meanwhile, ExxonMobil is down 3.6 percent this week. Chevron down nearly 2 percent. So is money just rotating out of fossil fuels and into solar? Lucas: That's the big question. A pure rotation would imply investors are making a deliberate bet that clean energy outperforms oil from here. But I think there's more going on. Luna: Like what? Because the macro backdrop doesn't scream 'risk-on' for growth stocks. Core CPI came in at 335.4 in April, up from 334.17. Inflation is still sticky. Lucas: Exactly. But look at the 10-year breakeven inflation rate — that's the market's expectation for average inflation over the next decade. It dropped to 2.39 percent this week, down from 2.44. So bond traders are betting inflation is peaking. Luna: And lower inflation expectations usually mean lower interest rates, which makes future cash flows more valuable. That's a tailwind for high-growth, high-multiple stocks like Enphase. Lucas: Right. Enphase trades at a pretty lofty price to earnings ratio — we're talking north of 30 times forward earnings. That multiple only works if the cost of capital is low. So the breakeven move might be a bigger catalyst than any company-specific news. Luna: But oil isn't just getting hit by macro. There's something specific happening in crude this week. WTI is down almost 12 percent, but Brent is only down about 8.6 percent. That's a big spread widening. Lucas: Yeah, the wti brent spread blew out. Usually that signals some kind of regional glut or logistical bottleneck. A lot of it is tied to Cushing, Oklahoma — the delivery point for WTI. If storage there is filling up, it puts severe pressure on the front-month contract. Luna: And that might be temporary. But the clean-energy rally feels… I don't know, more structural? Or is that wishful thinking? Lucas: I think it's a bit of both. Look, the Invesco Solar ETF is still down more than 30 percent from its 2021 highs. So calling this a new bull market for solar would be premature. But the week's move is notable because it happened while oil was collapsing. Luna: It breaks the pattern we've seen for most of 2025 and into 2026 — that energy stocks and oil prices basically moved in lockstep, and clean energy lagged. Lucas: Right. For a while there, if oil rallied, energy stocks rallied and solar stocks didn't. Now oil is falling, and solar is soaring. That suggests some investors are starting to price in a different energy mix going forward. Luna: Maybe it's also the policy backdrop. With the midterms approaching, there's chatter about extending solar investment tax credits. Nothing concrete, but the market sometimes buys the rumor. Lucas: Sure. But I want to focus on one number that jumped out at me: Enphase's 27 percent weekly gain. For context, the stock was at $49 a week ago. Now it's $63. That's a $14 move in five days. What fundamental change could justify that? Luna: There wasn't a major earnings release. No new product launch that I saw. It seems purely macro and sentiment driven. Lucas: That's why I'm cautious. When a stock rallies 27 percent in a week on no company-specific news, it often gives some back. But the broader move into solar ETFs — TAN up 5 percent, ICLN up 5 percent — that feels more like a thematic allocation shift. Luna: And it's not just solar. First Solar is a manufacturer, Enphase makes inverters. They're different parts of the value chain. So if both are rallying, it suggests a sector-wide re-rating. Lucas: Yeah. Meanwhile, the broader market had a pretty strong week too. The Dow jumped over 400 points today to a new record. So some of this is just risk appetite coming back. Luna: But oil is still risky. WTI at $95 is down from $112 just a week ago. That's a 15 percent drop. If that persists, it's going to show up in inflation data pretty quickly. Lucas: And that might be exactly what the Fed wants to see. Lower oil prices ease supply-side pressure. The 10-year breakeven dropping suggests the market thinks the Fed can actually pull off a soft landing. Luna: But core CPI is still running at around 3.3 percent year-over-year, if you annualize the April number. That's above the Fed's target. So they're not out of the woods yet. Lucas: No, they're not. But the market is forward-looking. If oil stays at $95 or lower, headline CPI could moderate significantly in the next few months. And that could give the Fed room to pause or even cut. Luna: So do you think the solar rally is sustainable? Or is it just a one-week anomaly? Lucas: I think it's too early to call it sustainable. But if lower rates and lower oil prices persist, the math for solar projects gets a lot better. Lower financing costs plus higher competitiveness versus natural gas. That's a genuine tailwind. Luna: One thing that stands out to me: natural gas prices are basically flat this week. Henry Hub is at $3.03 per MMBtu. That's not cheap, but it's not spiking either. So solar's rally isn't because gas is getting expensive. Lucas: Exactly. In fact, natural gas is usually a competitor to solar in power markets. When gas is cheap, solar looks less attractive. So the solar rally is happening despite gas being stable. That reinforces the idea that it's about rates and sentiment, not fuel switching. Luna: And maybe about valuation. Clean energy stocks got absolutely crushed in 2022 and most of 2023. Enphase went from over $300 to under $50. So even after this week's move, it's still 80 percent off its high. Lucas: That's the kind of recovery story that catches traders' eyes. But I'd caution: just because something has fallen 80 percent doesn't mean it can't fall another 50 percent. The fundamentals need to support the re-rating. Luna: What fundamental would you want to see to get more bullish on solar? Lucas: I'd want to see evidence that installation volumes are accelerating. Not just in the U.S., but globally. The Inflation Reduction Act created a lot of incentive, but actual deployment has been slower than expected due to permitting and grid interconnection issues. Luna: So it's not just about policy — it's about execution. And that's hard to track in real time. Lucas: Right. Which is why I'm watching the earnings calls of solar companies for Q2. If they start raising guidance, that's a signal that the macro optimism is translating into real demand. Luna: And what about oil? Do you think this week's sell-off is the start of a bigger downturn? Lucas: I think the wti specific dynamics — the Cushing storage issue — could reverse quickly. But the broader picture is that global demand growth is slowing. The IMF just cut its global GDP forecast again. And supply is coming back from places like Iran and Venezuela, if the diplomatic tracks hold. Luna: So oil might stay under pressure. And if it does, that could further support clean energy by making renewables more cost-competitive. Lucas: It's a plausible narrative. But markets don't always follow narratives in a straight line. This week, solar had its best week in years while oil had its worst. Next week, it could flip. That's why I'm hesitant to call a regime change based on five days. Luna: Fair. But it's a fascinating divergence to watch. And it gives us a lot to talk about for the rest of the month. Lucas: Absolutely. We'll be tracking these numbers closely. Next week, I want to look at the actual capacity additions data from the Energy Information Administration — see if the pipeline is really filling up. Luna: Sounds like a plan. For now, let's see if Enphase can hold above $60. That's a key level. Lucas: Yeah, if it does, this rally might have legs. If not, it was just a macro-driven squeeze. Either way, we'll be here to break it down.