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TAN's Explosive Growth: A 2021-2026 Retrospective

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  Published in Stocks and Investing on Saturday, January 24th 2026 at 0:12 GMT by The Motley Fool
      Locales: Delaware, California, Massachusetts, UNITED STATES

A Retrospective on TAN's Explosive Growth (2021-2026)

Between 2021 and 2026, the Invesco Solar ETF (TAN) captivated the investment community with a phenomenal performance. The ETF, which tracks companies involved in the solar energy industry - from manufacturers to installers - witnessed a remarkable doubling of its value. While the initial surge was impressive, it wasn't solely about the headline number; it reflected a profound shift in global energy priorities and technological advancements.

Several key factors underpinned this impressive run. The initial impetus came from increasingly aggressive government incentives, both in the United States and internationally. The Inflation Reduction Act of 2022 significantly bolstered solar energy projects through tax credits and subsidies, creating a strong tailwind. Simultaneously, the relentless decline in the cost of solar panels, driven by innovation and economies of scale, made solar power increasingly competitive with fossil fuels. This affordability, combined with rising consumer and corporate demand for sustainable energy solutions, fueled a surge in installations and overall market growth.

What made TAN particularly attractive during that period was its surprisingly attractive valuation. Despite the impressive gains, analysts consistently flagged TAN's price-to-earnings (P/E) ratio as comparatively low when benchmarked against broader market indices. This perceived undervaluation suggested that the market hadn't fully priced in the long-term growth potential of the solar sector, leaving room for further appreciation. It sparked considerable debate among analysts, with many arguing that TAN represented a value play disguised within a growth-oriented investment vehicle.

The Evolving Landscape: 2026 and Beyond

Fast forward to 2026, and the solar energy sector presents a more nuanced picture. While the fundamentals remain strong, the environment has shifted. The initial frenzy surrounding the IRA's passage has cooled, and the market has adjusted to the new regulatory landscape. Competitiveness within the solar energy market has intensified, leading to price pressures and margin compression for some companies.

Moreover, the geopolitical climate has introduced new uncertainties. Supply chain disruptions, initially exacerbated by the pandemic, have impacted the availability and cost of key components, namely silicon. Trade tensions and protectionist measures have also created headwinds, potentially affecting international solar projects. The emergence of competing renewable technologies, such as advanced wind power and energy storage solutions, adds another layer of complexity.

Assessing TAN's Current Position

As of early 2026, TAN's performance has stabilized. The spectacular doubling experienced in the prior five years is unlikely to be repeated in the short term. However, the underlying trends that fueled the initial growth - the global push for decarbonization, continued cost reductions in solar technology, and rising demand for clean energy - remain in place. The ETF's P/E ratio, while still relatively attractive, is no longer as strikingly low as it once was, reflecting the increased maturity of the sector.

Risks to Consider

Investing in TAN, or any sector-specific ETF, carries inherent risks. Volatility remains a significant factor, susceptible to fluctuations in commodity prices (particularly polysilicon), technological breakthroughs that could render existing technologies obsolete, and the unpredictable impact of weather patterns on solar energy generation. Furthermore, government policies remain a crucial determinant of the sector's success; any significant rollbacks or changes in incentives could negatively impact profitability. Finally, increased competition continues to put pressure on margins, demanding constant innovation and efficiency improvements from the companies within the TAN portfolio.

Conclusion: A Long-Term Play?

While the immediate returns from the Invesco Solar ETF (TAN) may not replicate the past, it remains a potentially attractive option for long-term investors with a strong conviction in the future of solar energy. It's essential to recognize the evolving risks and conduct thorough due diligence before investing. TAN offers a convenient and diversified way to gain exposure to a vital sector poised for continued, albeit more measured, growth in the decades to come. The "bright investment" may now be a more sustainable, long-term glow, rather than a sudden burst of intense light.