Tag Archives: itc

Glut Feeling: Chinese Solar Manufacturers Ignore ‘Bellwether’ Views

Chinese firms JA Solar ( JASO ), JinkoSolar ( JKS ) and Trina Solar ( TSL ) will force a solar panel glut in 2016, expanding capacity despite a 4.5-gigawatt demand cliff in Japan and the U.K., Credit Suisse analyst Patrick Jobin suggested Monday. Meanwhile, “bellwether” U.S. rooftop solar installers, including SolarCity ( SCTY ), Sunrun ( RUN ) and Vivint Solar ( VSLR ), have cut their 2016 guidance by 0.6 GW, on average vs. initial expectations, Jobin wrote. European incentives and a Chinese boom oversupplied the market in 2012, causing prices to topple and manufacturers like SunPower ( SPWR ) to cut jobs. The upcoming glut puts higher-cost solar panel makers JA Solar and Trina Solar at heavy risk, Jobin says. On their Q4 earnings conference calls, all three acknowledged a potential 2016 supply glut, but “still announced capacity expansions, citing growth from efficiency improvements and higher capacity build outside China,” Jobin wrote in a research report. Jobin cut his price targets on JinkoSolar and Trina Solar to 40 from 42, and to 14 from 15, respectively. Midday, shares of Trina Solar and JinkoSolar were both down nearly 1% in early afternoon trading on the stock market today . JA Solar stock was up a fraction. Regulators in Japan and the U.K. recently announced cuts to solar feed-in-tariffs (FiT), key subsidies that triggered a surge in solar investment. In 2016, Jobin expects Japanese and U.K. demand to slow by a respective 2 GW and 2.5 GW. In the U.S., a much-lauded extension to the Investment Tax Credit (ITC) on solar installations pushed out installation of 1 GW to 2017, Jobin wrote. Globally, manufacturers see 10 GW in solar cell capacity expansions in 2016, vs. market demand for 6.1 GW. Demand is expected to slow to 11.5% growth in 2016 vs. 17% growth in 2015, Jobin wrote. Compounding that, manufacturers expect a 5%-10% decline in second-half 2016 average sales prices. “We anticipate the need for capacity expansion outside China, especially as the ITC extension improves the long-term demand outlook in the U.S., but we believe the timing and magnitude of new capacity builds may exacerbate oversupply and pressure margins,” he wrote. Among the three companies, Jobin prefers vertically-integrated JinkoSolar, which he says keeps internal production and outside sourcing costs low. But even a 1-cent per-watt decline in gross profits could reduce JinkoSolar, Trina Solar and JA Solar’s 2016 earnings by 33%, 38% and 58%, he said.

U.S. Crushes Solar Installation Record In ‘Monumental’ 2015

U.S. solar installations boomed in 2015 to a record-stomping 7.3 gigawatts as legislators bandied about the fate of the Investment Tax Credit on solar, the Solar Energy Industries Association said Monday. For the first time ever, solar energy beat out natural gas capacity additions. Solar energy generated 29.5% of all new electric-generating capacity in the U.S. California, North Carolina and Nevada led the charge, and the three states now top 25 GW in cumulative installations. There’s still plenty of headroom for growth, said Shayle Kann, Greentech Media Research senior vice president. The top 10 states account for 87% of installed capacity, but 24 of 35 states Greentech tracks saw market growth in 2015, he said in a statement. SEIA CEO Rhone Resch, in the association’s press release, called 2015 “a monumental year for the U.S. solar industry.” The year was also marked by Obama’s Clean Power Plan, a pledge to cut carbon emissions by power plants, and a 196-country agreement to cut carbon emissions during the COP21 (Conference of Parties) climate change summit in Paris. “Over the next few years, we’re going to see solar continue to reach unprecedented heights as our nation makes a shift toward a carbon-free source of energy that also serves as an economic and job-creating engine,” Resch said in the release. In 2015, residential installations jumped 66%, outgrowing the commercial and utility markets, which were flat and up 6%, respectively. Still, utility installations — First Solar ( FSLR ) and SunPower ‘s ( SPWR ) wheelhouse — continued to account for more than half of all installed capacity. Overall, installed capacity has grown 1,150% since 2010, when U.S. solar capacity touched just 2 GW. Last year, the residential segment alone eclipsed 2 GW in installations — a first. Residential installations now comprise 29% of the entire U.S. solar market, its largest share since 2009, the SEIA said. Commercial installations trailed but managed to break 1 GW for the fourth year running. Solar Stocks Got Late-2015 Boost From Congress The results shine light on the recently shadowed industry. IBD’s 23-company Energy-Solar industry group is down 31% for the year after sharply rising at the end of 2015 on Congress’ decision to extend the Investment Tax Credit (ITC) on solar for five years. The ITC has been slated to expire Dec. 31, 2016, and Wall Street expected solar demand to hit a floor in 2017. Shares of installers First Solar, SunPower, SolarCity ( SCTY ) and Sunrun ( RUN ) lit up on the extension. Tesla ( TSLA ) CEO Elon Musk chairs SolarCity. But the rally was short-lived. Less than two weeks later, stocks plunged after Nevada regulators opted to cut net-metering payments to solar customers, or what utilities pay solar customers for excess energy fed back into the grid. Warren Buffett’s Berkshire Hathaway ( BRKA )-owned utility NV Energy pushed for the cut, which will take place in five steps over 12 years. Utilities dislike net-metering mandates, which forces them to buy energy at a high cost. This month, Nevada regulators voted against grandfathering in existing solar customers under the old rate scheme. Sunrun executives have said they will sue. In 2015, California regulators went in the opposite direction. The California Public Utilities Commission voted to retain net metering but add interconnection costs, new minimum bill requirements and time-of-use rates, according to Greentech. Other states are likely to take up the issue. Net metering is mandated in 44 states. Last year, 13 states each added at least 100 megawatts in installations, helping lead to 17% growth in the U.S. solar market. Utah jumped from No. 23 state in solar to No. 7, and Georgia moved from 16th to eighth place. Nevada was No. 3 on the installer list for the second year running. In 2013, Nevada was No. 12. California and North Carolina have led in recent years. But analysts say Nevada solar demand is likely to hit a floor in 2016 on the new net-metering rate scheme. SolarCity and Sunrun exited their Nevada operations in December because of that then-pending move. Vivint Solar ( VSLR ), soon to be acquired by SunEdison ( SUNE ), made a similar threat at the time.

First Solar, SunPower To Overshadow SolarCity, Sunrun In 2016 Melee

No. 2 solar installer SunPower ( SPWR ) and Nevadan utility giant NV Energy partnered Tuesday to complete a 15-megawatt solar installation on Nellis Air Force Base — adding to a 13.2-MW system implemented in 2007. Together, the two stations can generate enough energy to power the base during daylight hours, according to NV Energy, which is a part of Berkshire Hathaway’s ( BRKA ) energy portfolio. The Nellis Solar Array II Generating Station is the first large-scale solar resource owned by NV Energy. SunPower’s announcement comes less than a week after Nevada regulators unanimously approved a solar-rate scheme that cuts net-metering payments to solar customers over 12 years. NV Energy pushed for that cut. Net metering, which means business and residential customers can receive payment for unused solar energy they feed back into the grid, is mandated in 44 states. The rules rile utilities, which could otherwise purchase the same energy at a wholesale price from utility-scale solar farms. First Solar ( FSLR ) and SunPower dominate the utility solar sector, Barclays analyst Jon Windham wrote in a January research report. In December, Congress’ adopted an eleventh-hour extension of the Investment Tax Credit (ITC) for solar, buoying residential installers like SolarCity ( SCTY ) and Sunrun ( RUN ). But growth in 2016 will come on the backs of utility-scale developers, industry tracker IHS wrote this month . No. 1 solar installer First Solar focuses on low-cost utility-scale projects likely to curry favor with the Obama administration’s 2015 Clean Power Plan. SunPower is vertically integrated with fingers reaching into the utility, commercial and residential solar pots. Utility-Scale Solar Flashes Before SunPower’s 15-MW commercial project wrapped, First Solar announced in January that it has installed “Australia’s largest utility-scale solar plants” — 155 MW between two systems in New South Wales. As of Jan. 20, there were 245 MW of utility-scale solar operating in Australia. First Solar built 165 MW (67%) of that capacity. The Aussies still have a long way to go to catch up to U.S. markets, which exceeded 2o gigawatts in cumulative installations early last year, according to the Solar Energy Industries Association , up from under 2GW in 2011. A gigawatt is equal to 1,000 megawatts and can power about 700,000 homes. China and Germany are the global leaders, raising their estimated installed solar capacity to 43GW and 40GW, respectively, in 2015. Earlier in 2015, the SEIA projected roughly 20 GW of additional solar capacity coming online — effectively doubling U.S. solar capacity — in the next two years. Nearer term, photovoltaic (PV) installations are expected to grow 60% year over year in 2016, reaching total installed capacity of 15 GW on the back of “strong demand for utility-scale PV,” IHS analyst Camron Barati wrote in a report. Previously, Wall Street modeled a 2017 collapse for the U.S. solar industry. The ITC was set to expire at the end of 2016. Then Congress voted in a five-year extension to the key subsidy. “While all market segments are expected to benefit from the ITC extension, utility-scale PV will benefit most and account for over half of newly added capacity from 2016 to 2019,” he wrote. Larger-scale installers like First Solar and SunPower are the safest investments in 2016, S&P analyst Angelo Zino told IBD. “These companies have significant backlogs of pipelines that allow them to navigate softness in the industry,” he said. “If we see more of a flat environment in 2016, First Solar and SunPower have the geographic reach as well as the pipeline and backlog to weather through any potential softness within the local markets here.” Barati doesn’t see any U.S. solar softness in 2016. But utility-scale demand could peter 30% in 2017, he noted. In 2015, 16 GW of projects entered the U.S. pipeline and 10 GW of tracked projects were installed or entered construction, IHS analyst Josefin Berg wrote in a separate report. Currently, the U.S. has a 50 GW pipeline of commercial- and utility-scale projects from 2016 to 2019, Barati wrote. “The previous panic to complete project phases ahead of schedule has reverted to a development pipeline responding to demand and contract fulfillment,” Berg wrote. Barati expects California, Texas and Nevada to each contribute 1 GW in 2016 installations — a divergence from other analysts. Credit Suisse analyst Patrick Jobin, however, sees Nevada demand hitting a floor on the net-metering cut. Will Nevada Demand Survive? Nevada regulators voted unanimously earlier this month to cut net-metering payments without grandfathering existing solar-energy customers — a decision that Sunrun executives plan to oppose legally. Residential installers Sunrun and SolarCity vehemently oppose Nevada’s net-metering cut which will take place in five steps over 12 years. Both exited Nevada in December after the first vote. Cumulatively, Nevada had installed a total 974 MW of solar capacity by Q2 2015, according to the SEIA. During Q4, SolarCity installed 272 MW, which was 8 MW short of its guidance after leaving Nevada. SolarCity and Sunrun still have some runway for 2016 installation growth, even without Nevada, Zino told IBD. A central issue for both, however – particularly SolarCity – is whether they will have sufficient access to capital . SolarCity is undergoing a strategic shift to become cash flow positive . The No. 1 residential installer will halve its installation growth target to do so. Currently, SolarCity is targeting 1.26 GW in 2016 installations, up 44% year over year. Solar is a capital-intense industry, Jobin says. Companies rely on tax equity capital, traditional bank financing and long-term securitizations to fund growth. In this environment, SolarCity and Sunrun are “very attractive” because they’ve already smartly deployed their capital in the form of fixed infrastructure costs. But investors fear dislocation could squeeze available capital, Jobin says. “My view is not that capital isn’t available to them; we’re just monitoring the health of the capital pools to them,” he said. “These assets are significant amounts of capital so if capital isn’t committed, demand would be challenged for all the players.” That could help explain a recent pullback in solar stocks. IBD’s 23-company Energy-Solar industry group ended 2015 1% higher after an up-and-down year. It has since fallen 32%. Still, the group ranked No. 11 on Friday – meaning over the past six months it has outperformed all but 10 of the 197 industries tracked by IBD. Regulatory challenges, fluctuating oil prices and the rise of alternative business models known as yield companies forced violent vacillation in 2015 solar stocks. The combination drove the 49% differential between the IBD group’s April high and its low on Nov. 17. Tough Yieldco Market Continues Wall Street is unlikely to let up on yieldcos in 2016, Zino says. Yieldcos are public companies formed to hold assets, generate dividends and create on-tap cash flow. The latter helps with the capital-intensive nature of the solar industry. In 2015, yieldco stocks were smashed. SunEdison ‘s ( SUNE ) TerraForm Power ( TERP ) and TerraForm Global ( GLBL ) exited 2015 down 57% and 63%, respectively. NRG Energy’ s ( NRG ) NRG Yield ( NYLD ) sliced 40% off its IPO price. First Solar and SunPower’s 8point3 Energy Partners ( CAFD ) left 23% behind in 2015 after going public in June. But 8point3 is one of the stronger names likely to “sustain tougher market conditions better than others,” Zino says. “The market has already shown a name like that is going to hold up better and we’ve seen that with the yields,” he said. Chuck Boynton, SunPower CFO and 8point3 CEO, says investors “have been running for cover” amid serious solar volatility . But 8point3 posted a strong first full quarter in operation, distributing 22 cents to shareholders, up 3.5% sequentially and in line with guidance. “Over time, they will see it really is a safe haven and that of the companies that are yield-oriented we are at the top of the class,” he told IBD in January. SunEdison’s plan for TerraForm Power, however, is seeing a bit more drawback. Activist investor Appaloosa Management is suing SunEdison over its plan to drop a 523-MW rooftop asset to TerraForm Power. Appaloosa owns 9.5% of the yieldco. The assets are owned by soon-to-be acquired Vivint Solar ( VSLR ). Although SunEdison’s acquisition is still pending, SunEd began trying to offload the debt-laden portfolio months ago. SunEdison stock plunged 92% between July and November as the drama played out in national headlines. Can Solar Cut The Cord? Over the last year, Tesla Motors ( TSLA ) teamed up separately with SolarCity , SunPower and SolarEdge ( SEDG ) to explore solar storage opportunities. Tesla CEO Elon Musk also chairs SolarCity. Solar storage is technologically possible, but remains too uneconomical for widespread adoption. As it is, solar customers still rely on utility electricity at night and on cloudy days. In Nevada, Nevada Power Company and Sierra Pacific Power Company solar customers use the grid 42% and 49% of the time. Industry watchdogs are split on whether solar customers will ever be able to completely cut their utility ties. But SolarEdge said earlier this month its StorEdge Solution, in conjunction with Tesla, will “ sell thousands of units ” in the first half of 2016. SolarEdge makes inverters and power optimizers, competing most directly with Enphase to supply panel manufacturers with key components. SolarEdge stock recently topped Needham analyst Y. Edwin Mok’s 2016 solar picks. Enphase ( ENPH ), too, is planning to release an energy storage system later this year in Australia, spokesperson Danny Miller told IBD earlier this month. A U.S.-based project will follow, he added. But Enphase won’t weather the post ITC-environment as well as SolarEdge, Mok wrote. He expects SolarEdge to grow beyond its 36% market share to the mid-40%-range on lessened pricing pressure. “Due to the extension of the U.S. solar ITC, we expect Enphase to deliver lower volume in 2016 as the ITC eliminates the need for installers to rush into completing projects within 2016,” Mok wrote.