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SOURCE Zacks Investment Research, Inc.
CHICAGO, Feb. 5, 2014 /PRNewswire/ -- Today, Zacks Equity Research discusses the Alternative Energy, including First Solar Inc. (Nasdaq:FSLR-Free Report), SunPower Corp. (Nasdaq:SPWR-Free Report), Ascent Solar Technologies, Inc. (Nasdaq:ASTI-Free Report), JinkoSolar Holding Co. Ltd. (NYSE:JKS-Free Report) and SolarCity Corp. (Nasdaq:SCTY-Free Report)
Industry: Alternative Energy
The solar industry rallied in 2013 following a tough period since 2011. The U.S. Energy Information Administration (EIA) estimates that U.S solar demand increased more than 32% in 2013. For 2014, the EIA projects that U.S. solar energy consumption will boom by roughly 35%. The expected increase in demand is likely to fuel top-line growth at the solar manufacturers.
President Obama's new environmental plan, unveiled in Jun 2013, putting further limits on existing coal-fired plants, gave a shot in the arm to the U.S. solar sector. The results were well reflected in the third quarter performance. The president issued directives asking environmental regulators to set up carbon pollution standards for active plants. Coal generates about 40% of U.S. electricity and coal plants are the largest source of carbon emissions in the country.
As a result, the U.S. Environmental Protection Agency is issuing directives to lower carbon emission from newer coal-based power plants while strengthening the existing policies on green-house gas emissions. This development has emerged as a major headwind for coal-fired utility stocks and has proved to be beneficial for renewable energy stocks like First Solar Inc. (Nasdaq:FSLR-Free Report).
That said, the U.S. still has a lot of catching up to do, despite enormous potential, to get anywhere close to the global leaders. Per the Solar Energy Industries Association (SEIA), the U.S. trade association of approximately 1,000 companies in the solar energy industry, as much as 930 MW of solar energy came on stream during the quarter, representing 35% growth over the prior-year quarter and 20% sequentially thanks to unmatched installation levels in the utility market and residential installations.
The third quarter of 2013 was one of the most happening quarters in the renewable space driven by a record level of residential installations and a strong quarter in the utility segment. It was the second largest quarter in the history of the U.S. solar market and the largest quarter ever for residential PV installations.
Looking at the cost side, the average cost of a completed PV system dropped by 16% during the third quarter 2013 on a year-over-year basis. Again, the average price of a solar panel has dropped by 60% since the beginning of 2011. These price drops will encourage more solar uptake by consumers.
Indeed the PV market is gradually becoming global. According to the European Photovoltaic Industry Association (EPIA), a worldwide industry association for the solar photovoltaic electricity market, the cumulative global installed PV capacity stood at almost 102.2 gigawatt (GW) at the end of 2012, compared to only 71.1 GW at the end of 2011. Europe took the lead with over 70.0 GW of installed PV capacity during the year.
As per media reports, China installed a record 12 GW of solar panels in 2013, making it the world's largest solar market in 2013, overtaking longtime leader Germany.
Last September, China's Ministry of Finance announced that local solar manufacturers will receive immediate refunds of 50% of the value-added tax (VAT) for sales taking place from Oct 2013 through Dec 2015. The Chinese government has set a solar installation target of 35 GW by 2015.
While the U.S. and China have been playing a big role in recent years in driving the industry, other nations are also pushing hard to have a home-grown solar generation capacity as a remedial measure to solve their electricity crisis. The latest to join this list is Asia's third largest economy, India. The country recently planned for a $4.4 billion solar plant which could perhaps be the world's largest.
Again, in Japan, companies like First Solar are investing substantially to install emission-free renewable set-ups. The country is expected to become the second largest market for solar products after China. First Solar -- the largest U.S. solar company -- is thus teaming up with Japanese counterparts to develop, build and operate solar power plants.
The American Wind Energy Association (AWEA) reported that the wind industry slowed radically during the first half of 2013 following a record fourth quarter 2012 installations. U.S. wind growth stagnated in the first half of 2013, with no new installations completed in the second quarter compared with 1.6 MW in the preceding quarter. However, the third quarter 2013 saw industry-wide installations of 69 MW, thereby bringing the total installed capacity to 60,078 MW.
There are more than 6,000 MW of long-term power purchase agreements signed since Jan 2013. As of Sep 2013, 2,327 MW of projects were under construction across 13 states: Texas, Michigan, Nebraska, Washington, Kansas, California and North Dakota. Other states having wind projects under construction comprise New York, Minnesota, Iowa, Colorado, Massachusetts and Indiana.
EIA expects wind capacity to expand 8.8% in 2014 to about 66 GW and 14.6% to over 75 GW at the end of 2015. Electricity generation from wind is projected to increase by 2.2% this year and 11.4% in 2015, contributing over 5% of total electricity generation by the end of 2015.
Hydropower is considered as the leading renewable energy source in the U.S. With the emergence of new technologies, like marine and hydrokinetics, this industry is likely to continue to generate vast amounts of sustainable energy throughout the country.
Hydropower is the cheapest source of electricity as it has the lowest cost per kilowatt hour compared to all other sources and is independent of the volatile movement in fuel costs. EIA projects that both hydropower and non-hydropower renewables used for electricity and heat generation will grow by approximately 3.0% in 2014.
In 2015, the growth in renewables consumption for electric power and heat generation is projected to continue at a rate of 4.7%, as a 2.2% increase in hydropower is combined with a 6.1% increase in non-hydropower renewables.
On Aug 9, 2013, President Obama signed into law two bills aimed at boosting the development of the nation's largest renewable electricity resource, hydropower. Enactment of laws is a prudent step to uphold hydropower development.
Zacks Industry Rank - Positive Outlook
We rank all the 259-plus industries in the 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. To learn more visit: About Industry Rank.
The way to look at the complete list of 259+ industries is that the outlook for the top one-third of the list (Zacks Industry Rank of #88 and lower) is positive, the middle 1/3rd or industries with Zacks Industry Rank between #89 and #176 is neutral while the outlook for the bottom one-third (Zacks Industry Rank #177 and higher) is negative.
Within the Zacks Industry classification, the Zacks Industry Rank for Solar is #16 out of 259. This corresponds to the top one-third of the list, implying a positive outlook.
However, the Zacks Industry Rank for the Other Alternative industry is #190 out of 259. This puts the industry in the bottom one-third of all industries.
Among the 14 companies in the solar industry under our coverage, SunPower Corp. (Nasdaq:SPWR-Free Report) and First Solar sport a Zacks Rank #1 (Strong Buy), while Ascent Solar Technologies, Inc. (Nasdaq:ASTI-Free Report), JinkoSolar Holding Co. Ltd. (NYSE:JKS-Free Report) and SolarCity Corp. (Nasdaq:SCTY-Free Report) carry a Zacks Rank #2 (Buy).
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