Solar Industry Headed for Blockbuster Year

Fickle subsidies used to drive the solar industry, and it was hard to predict from quarter to quarter what industry demand would be. But subsidies have fallen in recent years, and the industry is starting to compete with the grid on a more consistent basis.

Once the solar industry passes grid parity in a location it's like a freight train that's impossible to stop. In Hawaii, which combines lots of sun and high electricity costs, regulators had to put a halt to installations just to figure out how to manage the grid with all the new solar on residential rooftops.

Slowly, that dynamic is playing out around the world, with utility-, commercial-, and residential-scale solar now competing with fossil fuels on a cost per kW-hr basis around the world. As a result, the industry is going to have a banner year.

SolarCity workers install a residential solar system. The company expects to grow installations to as much as 1 GW in 2015. Image source: SolarCity.

Explosive growth is just beginning
NPD Solarbuzz recently predicted that solar demand would jump 30% in 2014 to nearly 50 GW. If that prediction comes true, module prices should rise to more sustainable levels, leading to profitability across the industry. 

Two of China's biggest suppliers are already planning to take advantage of this increase in demand. Trina Solar (NYSE: TSL  ) is expecting to ship between 3.6 GW and 3.8 GW of solar modules in 2014, up from 2.58 GW last year. Yingli Green Energy (NYSE: YGE  ) expects to increase shipments by as much as 33% to 4.0 GW in 2014. As two of the largest solar suppliers, Trina and Yingli not only have a lot riding on increasing shipments, they have a lot to gain as well.

Yingli is hoping its high efficiency Panda module will drive demand in residential solar. Image source: Yingli Green Energy.

Both can use their leveraged balance sheets to turn profits for shareholders, which have been a drag for the last few years but will be beneficial now. Trina Solar has already turned a profit, one that should grow throughout the year, while Yingli could swing to a profit later in the year.

2015 and beyond
The good news is that the solar industry is just getting started. Once grid parity is passed, there's no going back.

SolarCity (NASDAQ: SCTY  ) , which uses panels from both Trina and Yingli, is going to grow around 90% this year, and will nearly double installations again in 2015 to as much as 1 GW of solar projects. SolarCity's costs are still falling as it becomes more efficient at installing solar projects, something we're seeing across the industry.

Companies are also starting to build their own projects, which will add incrementally more value as well.

I wouldn't be shocked to see solar installations exceed 50 GW this year and grow another 30% next year, which would bring demand above capacity. That puts solar manufacturers in the driver's seat, as they'll be able to charge more for solar panels as demand around the world grows.

It's a good time to be a solar investor, and the ride shows no signs of ending anytime soon.

Will this stock be your next multi-bagger?
Solar is hot in 2014 and if you're looking for another industry to watch we have a great one for you. Every year, The Motley Fool's chief investment officer hand-picks 1 stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2968193, ~/Articles/ArticleHandler.aspx, 9/3/2015 3:03:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Travis Hoium

Travis Hoium has been writing for since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things.

Today's Market

updated 5 hours ago Sponsored by:
DOW 16,351.38 293.03 1.82%
S&P 500 1,948.86 35.01 1.83%
NASD 4,749.98 113.87 2.46%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/2/2015 4:00 PM
SCTY $49.42 Up +3.26 +7.06%
SolarCity CAPS Rating: ****
TSL $8.79 Up +0.32 +3.78%
Trina Solar Limite… CAPS Rating: **
YGE $0.72 Down -0.03 -4.00%
Yingli Green Energ… CAPS Rating: *