Northland sees solar demand rise from electricity costs and heat

Investing.com -- Northland Capital said a combination of higher electricity costs, rising demand, and El Niño conditions will increase demand for solar and battery storage in the US and Europe this summer.

The firm's preferred stocks in the sector include NYSE:ENPH, NYSE:NXT, NASDAQ:SPWR, NYSE:TYGO, and NYSE:TE.

The earth is in an El Niño period expected to intensify into a strong or potentially historic super event. El Niño years are the hottest years of any decade, according to Northland.

The current heat wave in Europe has affected energy production as demand increased. In the UK, gas-fired power plants reduced output as they struggled to cool plants. In France, rising river temperatures led nuclear power plants to reduce output. Higher natural gas prices, driven by the war in Iran, are also increasing electricity costs in Europe.

In the US, a heat wave across the eastern third of the country this week with expected record highs is affecting 142 million people.

Increased demand for electricity driven by data centers, onshoring, and electrification has raised electricity demand and costs in the US. The average summer electricity bill is expected to be $778 per month this summer in the US, up 8.5% from 2025. The average bill has increased 37% since 2020, at a 5.4% compound annual growth rate.

Solar starts to make financial sense even without tax incentives when the cost per kilowatt-hour is between $0.22 and $0.26, Northland said. The average cost of electricity in the US is currently 18.9 cents per kilowatt-hour.

States with electricity costs higher than $0.26 include California, Connecticut, Hawaii, New York, Massachusetts, Rhode Island, and the District of Columbia. States above $0.22 include Alaska, New Hampshire, Maryland, Michigan, and Vermont.

In Europe, the recent heat wave has strained the grid and increased wholesale prices. In the UK, system operators paid $1.82 per kilowatt-hour to import energy, roughly 15 times higher than typical day-ahead prices. Last week in Germany, peak electricity prices were $0.64, up 15 times compared to a year ago.

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