A new report released this month provides a detailed analysis of hundreds of utilities' solar supply and sentiments. Solar is shaking up many traditional energy production perceptions, and that has made it a must-know for dividend stock utility investors. Here's where solar stands.
The Solar Electric Power Association released its 2012 utility solar rankings (link opens a PDF) this month, which shows that use of this renewable energy is on the rise. Total annual capacity clocked in at 2,384 MW last year, more than three times 2010 numbers. And while residential solar continues to creep higher, utilities upped their capacity by 150% in one year, from 435 MW in 2011 to 1,106 MW in 2012.
Pacific Gas & Electric (NYSE:PCG) got a specific shout-out for its massive 250 MW power purchase agreement with FirstSolar (NASDAQ:FSLR). FirstSolar's Agua Caliente project totals 290 MW and is the largest solar PV project in the world. Power purchase agreements seem to be the name of the game for most utilities, with just 12% of large-scale (>5MW) solar projects actually owned by utilities themselves. That means more business for power producers like FirstSolar, but more stable and long-term costs for utilities like Pacific Gas.
Sun dance awards
It should come as no surprise that Pacific Gas took the cake in 2012's national solar rankings; it's the fifth straight year for the utility. At 806 MW, this utility upped its new capacity 180% from 2011 to 806 MW.
But second and third place provide some evidence that the solar game still has plenty of room for new players. Up from fourth place in 2011, Edison International's (NYSE:EIX) Southern California Edison, or SCE, snagged silver with 195 MW of capacity. Unlike Pacific Gas' centralized capacity, 85% of this utility's solar came from more than 15,000 distributed projects.
SCE bumped PSEG's (NYSE:PEG) Public Service Electric & Gas subsidiary down from its second place perch in 2011 to third for 2012. Not everyone's winning with solar, and this utility's dip from 181 MW in 2012 to 145 MW in 2011 serves as a sobering reminder that solar prices are sustainably competitive yet. Public Service got into solar before most and upped its solar game as high-priced renewable-energy credits kept flowing in. But with an influx of new supply in 2012, credits fell from more than $600 to as low as $70 in 2012.
While these rankings only measure new capacity added for the 2012 calendar year, the same dividend stocks take the top three spots for cumulative solar MW. Pacific Gas' total clocks in at 1,569, followed by 947 for SCE, and 443 for Public Service Electric & Gas.
Can solar stick?
The report also makes mention of potential new contenders for next year's top spots. Southern (NYSE:SO) got a shout-out for its Georgia Power subsidiary's renewable moves. The dividend stock is expected to add 105 MW of solar to its generation in 2013 and has recently made corporate-level moves to ramp up solar with a 139 MW First Solar farm joint-acquisition with Turner Renewable Energy.
Looking ahead, analysts expect solar to soar even higher in 2013 -- to the tune of more than 3,000 MW. And as capacity increases, costs are on the decline. The report estimates utility-scale projects to drop to around $2 per watt, an 18% decrease over 2012 costs. For now, at least, it seems there's a lot in store for energy stocks sticking with solar.
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