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Solar Restart on the Horizon

Written by Meg Dailey
Posted October 23, 2016

“We want to be a place to restart community after a natural disaster.”

It sounds like a doomsday prepper's dream or a bid to save the world. Wal-Mart's plan is to be totally removed from the grid, powered only by renewable energy sources and lithium batteries, by 2020. Ambitious as it may sound, it's been a boon to an industry falling into a lull. 

Ever since the extension of the investment tax credit (ITC) late last year, investments in solar companies have slipped.

The market expected to see a sudden increase in new solar installations in the rush for installers to get the biggest credit. Instead, the country’s solar installers... took a break.

Without the sudden pressure to get new projects underway, companies and individual buyers alike have relaxed, causing solar capacity growth to do the same.

But don’t think that means you should ignore solar stocks. In fact, this may just be the best time to buy in...

Market Restart

Wal-Mart, for all its boasting, isn’t the only company building a renewable base. In fact, it’s not even the biggest!

The Solar Energy Industries Association’s biggest corporate solar installer lineup currently reads like this:

  • Target (147 megawatts)Solar Walmart
  • Wal-Mart (140 megawatts)
  • Prologis (107.8 megawatts)
  • Apple (93.9 megawatts)
  • Costco (50.7 megawatts)

Other big solar installers include Kohl’s, Ikea, and Macy’s. Each has a goal of being mostly, if not completely, powered by clean energy within the next few years.

These large-scale installations are becoming a larger part of solar's growth this year, even as that growth slows.

Without the hype to keep them up, solar stocks are slowing as well. But given the long-term outlook on the technology, that may just be giving savvy investors a chance to grab up the best stocks at a bargain.

GTM Research expects that solar capacity will increase steadily through 2020, though recent research suggests there will be a lull through 2017.

Investors shouldn’t worry about a single year’s worth of slow growth, however — not in an industry that’s had such steady increases since its inception and is expected to continue expanding for the foreseeable future.

The Energy Information Administration estimates that solar will account for about 1% of all U.S. energy by next year, up from 0.6% in 2015.

That may not seem like a lot, but it’s just the beginning. The whole world is working to move away from fossil fuels now, which means the market for renewables has been busted wide open.

And just because we haven’t yet seen the surge in installations that many expected doesn’t mean it won’t happen at all.

The ITC offers a 30% tax credit on all solar installations under construction by the end of this year. That number drops to just 26% after 2019, 10% after 2021, and cuts out completely in 2023.

New projects still have a little bit of leeway in getting those credits, and the rush may come at the last minute.

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Additional Storage

Anyone looking to be 100% solar anytime soon is also going to need some battery power to back it all up.

Energy storage and renewable technologies go hand in hand, if only because there still needs to be electricity running when the sun goes down.

Large-scale energy storage especially will see some growth in coming years as energy grids all over the world integrate more solar and other renewables.

The biggest growth in these large-scale systems is yet to come!

Now, by the time that happens, I expect we’ll have much better solar panels as well. We’ll have to, in fact! Right now, the best designs only function at about 28% efficiency, not nearly enough to make up for all the fossil fuel power the world wants to retire.

Renewable energies are struggling to find the balance between efficiency and price. For obvious reasons, higher-efficiency solar panels cost more, which makes widespread adoption a challenge.

But the price is dropping as capacity is growing, helped along by projects like Wal-Mart’s. The more low-cost installations are adopted, the easier it will be to integrate the technology everywhere else.

Investment Interest

I wouldn’t blame you for hesitating to buy into solar right now. The recent history of the biggest installer in the country, SolarCity, reads more like a cautionary tale than a success story.

But even the skeptics are only seeing a slowdown through 2017. Beyond that, business will pick up again, and probably even reach new highs as the final deadline for the ITC comes into play!

Without a doubt, this is far from the death of the solar industry.

Until next time,

Megan Dailey
Energy and Capital

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