KB Securities sees solar demand outlook improving

Investing.com -- KB Securities said the solar industry's recent price correction may be overdone as rising electricity costs are expected to offset higher module prices and interest rates.

Solar stocks declined in August and September on concerns about installation demand following increases in module prices due to Section 232 tariffs and rising interest rates. Module average selling prices are projected to climb from $0.30-0.33 per watt to $0.38-0.437 per watt.

Modules represent 31% of costs for utility-scale systems and 11% for household systems. A 32% increase in module prices would raise total investment costs by just 3-10%, according to the firm's analysis.

The U.S. 10-year Treasury yield rose from 4.42% in the second quarter of 2026 to 5.24% as of September 28. The solar industry remains sensitive to interest rate changes due to high initial investment requirements.

Electricity prices in late September increased enough to compensate for higher interest rates, driven by growing power demand from data centers. Three-year PJM power futures jumped to $89.5 per megawatt-hour on September 28, up 37% year-over-year and 20% from the second quarter. MISO and ISO-NE recorded similar gains of 14% and 15%, respectively.

KB Securities calculated that for a 100-megawatt utility-scale solar plant operating for 30 years, a 14% rise in power purchase agreement prices would increase revenue by $36.1 million. The interest rate increase would add $3.3 million in interest expense.

The firm named Hanwha Solutions and DL Holdings as top picks. Hanwha Solutions' engineering and residential solar businesses are expected to benefit from stronger downstream demand, while its module business should gain from policy-driven price increases. DL Holdings' U.S. gas-fired power plants in PJM are seeing higher power purchase prices without corresponding increases in natural gas costs.

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