In a fast changing solar world, companies' positions in the market can change almost everyday. This week, some interesting news came out from a fairly small U.S. residential solar company and some subtly huge news from utility regulators. Here are the two things you should know from the solar industry this week.
A new public company
Sungevity, which is the fifth biggest residential solar installer with around 3% market share in the U.S., is going public via a reverse merger with shell corporation Easterly Acquisition Corp. Easterly will acquire all of Sungevity in a deal that values the company at $357 million, according to GTM Research.
What differentiates Sungevity from well-known companies like SolarCity (NASDAQ:SCTY.DL), Vivint Solar, and Sunrun is that it doesn't own the installation infrastructure. It's essentially a technology and customer acquisition company, which lowers risks in the case of a downturn. But it's also gained very little traction, as indicated by the very small market share in the U.S.
We don't know a lot about Sungevity's numbers and the deal won't close until later this year, but this is a strange move given the struggles SolarCity, Vivint, and Sunrun have had of late. Maybe the thought is that Sungevity is more of a technology play, but it seems strange that it would be worth more than the No. 2 installer in the U.S., Vivint Solar -- and it's providing similar technology to what SunPower (NASDAQ:SPWR), Clean Power Finance, and Sunrun are offering.
We'll see how this new public company plays out, but count me skeptical that it'll fare better than bigger competitors on the market.
New ruling opens up massive potential solar market
The regulatory and policy weeds of the solar industry can be a confusing jungle, but there was a ruling this week that all solar investors should take note of.
The Federal Energy Regulatory Commission (FERC) ruled that electric cooperatives and municipal utilities, who often have agreements with power producers to buy at least 95% of their energy, can exceed their 5% limit by signing power purchase agreements with independent power producers. This ruling was made under a 1978 act that requires utilities to purchase electricity from any distributed or renewable source that can provide energy at a price equal or slightly higher than their avoided cost of electricity.
That may sound complex, but it allows 905 electric cooperatives and 830 municipal utilities to buy renewable energy, something they've largely been blocked from doing in the past. And it could open up a 400 gigawatt total market. Even if the solar industry got 10% of that market, it would open up 40 giggawatts of demand, which compares to 7.3 giggawatts installed in the U.S. in all of 2015.
For the country's biggest installers, like SolarCity, SunPower, First Solar, and Canadian Solar (NASDAQ:CSIQ) this ruling could be a huge tailwind. They're exploring how community solar could grow in the U.S., which this ruling would fit into nicely, and could ride the wave of a growing market.
This is a BIG ruling for the solar industry and investors should take it as a very bullish sign for the future.