The decision may be rooted in actions of the Trump Administration. Earlier this year, President Trump announced a 30% tariff on imported solar equipment that would last at least the next four years. The decision was a response to a couple of U.S. solar companies charging that China’s solar subsidies were allowing Chinese solar companies to undercut U.S. solar manufacturers.
Because China is the world’s leading consumer of solar power, I didn’t expect this decision to have a huge impact on China’s solar industry. But now that a larger trade war looms, China may have made a decision to signal to the U.S. that it will stop allowing Chinese solar panel makers to substantially undercut U.S. manufacturers.
Although the overall growth rate of the solar industry may suffer, in the long run, solar PV is still all-but-certain to outgrow every other energy category. In the short term this decision is going to create a lot of uncertainty around the industry, but I think we will look back on it as just a minor bump in the road.
I decided to take advantage of the sell-off. Given the sudden change in outlook, I sold some cash-covered puts on one of the leading solar power companies at an attractive price. I got an annualized yield on the cash I risked of 22%, and if I “lose” on the trade I will end up with shares of this high-quality company at a 10% discount to the price after what has already been a steep sell-off.
In the long run, that’s a trade that I expect to work out well.
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