The solar industry moves quickly, and that can lead to big wins, as well as pitfalls for investors. A few of the industry's biggest players have seen that first hand in the last few months of 2016 alone. SunEdison went from flying high to bankruptcy, and this week's earnings reports put some of the industry's biggest players through the ringer.
Here are the biggest things you should take from this week in solar.
SunEdison's assets are up for grabs
One big news item for the week was NRG Energy (NYSE:NRG) moving into the lead to acquire 2.1 GW of assets from bankrupt SunEdison. Under a "Stalking Horse" agreement that will set a floor on bidding, NRG would pay $188 million for the assets in various stages of construction.
The bidding process could be having a ripple effect across the solar industry. SunPower (NASDAQ:SPWR) said expected returns rose for projects that it tried to sell in early summer, leading to lower prices. NRG and others could be holding back on buying assets until the SunEdison bankruptcy sales are completed. And if NRG Energy wins, it could be a windfall for the company.
Residential solar is recovering and transitioning
In earnings reports this week, we saw both a recovery and transition in the residential solar market. SolarCity (NASDAQ:SCTY.DL) and Sunrun (NASDAQ:RUN) saw good installation momentum in the second quarter, and started to transition their businesses to cash and loan sales, a huge departure from the leases that have dominated their businesses.
SunPower's earnings report had a lot of negative headlines, but the company is reporting strong margins and market-share gains in residential solar. SunPower has always had more cash and loan sales than leases, and with a high-efficiency product, it should be set up for growth in residential solar next year.
Residential solar isn't going to be a huge growth market like it was a few years ago, but steady growth would be welcome for solar companies, especially when you consider what's going on in the utility space.
2017 is going to be bad in utility-scale solar
If there is any question about how bad 2017 will be in the utility-scale solar market, this week solidified the answer. The year 2017 is going to be bad for everyone from First Solar (NASDAQ:FSLR) and SunPower to inverter manufacturer SMA. This has a few impacts up and down the value chain.
Solar-panel prices are already starting to come down, which will impact solar manufacturers like Canadian Solar (NASDAQ:CSIQ), which is one of the biggest manufacturers in the world. And developers First Solar, SunPower, and Canadian Solar's Recurrent Energy arm will also see far less demand than they may have expected.
The year 2016 has been a banner one in the utility-scale solar market, but that has left utilities flush with renewable energy going into 2017, and little need for new projects. Demand is starting to return for 2018 contracts, but 2017 will be really bad for these large solar projects.
For companies that can transition to residential or commercial solar project development or international markets, there may be some reprieve. But this will be an abyss that the industry has to get over, and right now it doesn't look pretty.
Arizona gives residential solar a nod... for now
One of the biggest fights over residential solar net metering has been in Arizona. Utility Arizona Public Service (APS) has been publicly against net metering, and tried to undercut rooftop solar in a variety of ways.
That's why this week's ruling from the Arizona Corporation Commission to keep net metering in place in UNS Energy's territory is so interesting. UNS Energy is a much smaller utility than APS, but it could be a bellwether for what will happen in APS territory. The commission ruled that net metering will be kept in place until a value of solar study is completed. The commission also won't allow utilities to change rates retroactively, something Nevada did allow.
This is good news for the solar industry because value of solar studies have typically shown that rooftop solar provides a benefit to the grid, not a net cost. And that should support net metering in the state.
Arizona could be one of the biggest solar markets in the country, but it's been mired in regulatory uncertainty for years. That could finally be opening up, which would be good for everyone in solar.