Solar Demand Outlook Brightens as Power Prices Offset Costs, KB Securities Says

The recent price correction in the solar industry may be overdone, as rising electricity costs are expected to more than compensate for headwinds from higher module prices and interest rates, according to a new analysis from KB Securities.

Headwinds Triggered Market Sell-Off

Solar stocks experienced a decline in August and September amid investor concerns over weakening installation demand. This was driven by two main factors: rising borrowing costs and increased equipment prices stemming from Section 232 tariffs.

The U.S. 10-year Treasury yield, a key benchmark for project financing, climbed from 4.42% in the second quarter of 2026 to 5.24% as of September 28. Simultaneously, solar module average selling prices are projected to increase from a range of $0.30-$0.33 per watt to $0.38-$0.437 per watt, according to the firm.

Rising Electricity Prices Provide a Buffer

Despite these pressures, KB Securities argues that the impact on total project costs is manageable. The firm's analysis notes that modules account for roughly 31% of costs for utility-scale systems and just 11% for residential installations. Therefore, a 32% jump in module prices would only increase total investment costs by a modest 3-10%.

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More significantly, a surge in electricity prices, driven by growing power demand from data centers, is creating a strong tailwind for solar project revenue. Key figures include:

• Three-year PJM power futures jumped to $89.5 per megawatt-hour on September 28, a 37% year-over-year increase.
• Similar gains were recorded in MISO (14%) and ISO-NE (15%).

KB Securities calculated that for a 100-megawatt utility-scale solar plant, a 14% rise in power purchase agreement (PPA) prices would boost revenue by $36.1 million over its 30-year lifespan. This far outweighs the estimated $3.3 million in additional interest expenses from higher rates.

Analyst Recommendations

Based on this outlook, the firm identified Hanwha Solutions and DL Holdings as its top picks. Hanwha is expected to benefit from stronger downstream demand and policy-driven module price increases. DL Holdings, which operates U.S. gas-fired power plants in the PJM market, is positioned to capitalize on higher power prices without a corresponding rise in its natural gas input costs.