Commodities
RBC Sees Strong Clean Energy Demand, Flags Tariff, Cost Pressures Ahead
Clean energy stocks are up about 8.5% year-to-date, with strong demand supporting elevated valuations despite policy and geopolitical risks, RBC Capital Markets strategists said in a Friday note.The sector has also gained roughly 5% over the past three months, with sustained demand and lower risk of major policy shifts supporting investor confidence, the report said.RBC expects first-quarter earnings to reflect continued strong demand and positive booking trends, though upside surprises may be limited given expectations are already elevated.Tariff uncertainty and the Iran conflict are shaping key sector debates, including higher freight-driven cost pressures, tax credit market uncertainty, and potential demand impacts, RBC said.Macro conditions remain supportive, driven by rising datacenter demand, longer lead times for gas generation, and a growing solar project backlog, which is up about 4% over the year.Tax credit markets remain a key focus, with prior uncertainty slowing activity in late 2025, though improving clarity is expected to support pricing recovery into 2026, the note said.However, lingering concerns around foreign entity restrictions and low investor risk appetite could weigh on residential solar pricing and financing models, RBC added.Rising oil prices are also creating cost pressures, with US trucking rates up about 35% since year-end 2025, potentially impacting margins, particularly for companies with higher shipping exposure.Freight costs could represent a larger burden for certain firms, with shipping accounting for roughly 9% to 10% of revenue for some compared with 3% to 4% for others, the report said.In Europe, elevated fossil fuel prices and energy security concerns linked to Iran tensions could accelerate renewable adoption, following earlier growth that tripled solar capacity from 2020 to 2023.Policy developments remain critical, with upcoming tariff decisions on solar imports and potential new trade measures expected to influence supply chains and pricing, RBC said.A polysilicon investigation could also impact costs, as China accounts for about 95% of global supply and offers significantly lower prices than other regions, the report noted.Despite these uncertainties, valuations remain strong and are supported by continued order flow, though elevated oil prices could pose a growing headwind for some manufacturers, RBC said.