We're a few weeks into January, and that means that data on the solar industry's performance over the past year is starting to come out. Estimates on installations look good so far, and next up will be earnings reports. Investors will want to watch both closely. Until we see earnings, here are some positive and negative trends to keep an eye on in solar.
2016 was a huge year for solar
Early estimates of solar installations in 2016 are starting to come out, and they're extremely impressive. The PV Market Alliance estimates that grid-connected solar installations worldwide grew 50% in 2016 to 75 GW. This is up from PVMA's own forecast in June that installations would be around 60 GW.
Analysts are having a hard time predicting solar installations right now because the market is changing so quickly. Solar panel costs fell by more than 30% in 2016, which makes solar energy cheaper and more cost-competitive with fossil fuels, which in turn leads to higher demand for it. Growth has been higher than expected in part because of costs falling more rapidly than anticipated.
While 2017 is expected to be a down year, the solar industry could see more traction than predicted because of falling costs. Who knows, maybe 2017 will be a year of surprising growth and lead to higher stock prices for solar companies.
The high-efficiency trend is real
I've been talking about efficiency in solar for years, and it appears that 2017 will see a big leap forward in that regard. According to research firm EnergyTrend, high-efficiency passivated emitter rear contact cells, or PERC, manufacturing capacity will jump from 15 GW at the end of 2016 to over 25 GW next year.
Two of the manufacturers to watch in the PERC market are Canadian Solar (NASDAQ:CSIQ) and JinkoSolar (NYSE:JKS). Both are building out mono-PERC capacity, and cells are currently selling for about a $0.05-per-watt premium to standard monocrystalline cells. If the market doesn't become saturated, they could see an improvement in margins from the trend toward higher-efficiency cells.
Another company to watch is SunPower (NASDAQ:SPWR), which remains the industry's efficiency leader. Competition moving into high efficiency is either an endorsement of the company's focus or it will undermine its current advantage over competing products. It'll be important to watch margins in 2017 to see where SunPower is trending.
News and notes
The war against renewable energy at the local level continues in the U.S., and may intensify during the Trump administration.
Last week, the Wyoming senate introduced a bill that would fine utilities $10 per MWh for selling electricity from renewable sources, which would make the energy sources uncompetitive. This week, the news about the bill's quiet introduction started making its way around renewable energy circles and will certainly cause a stir. States often follow successful policy from other states, so if Wyoming is able to essentially bar renewable energy, the move could be copied elsewhere.
Wyoming is unique in that it gets nearly 90% of its electricity from coal, and the bill is sponsored by senators from regions with coal mines, so this may be trying to delay the inevitable demise of the fuel. It's concerning nonetheless that such a bill would even be introduced in a state that has a 3 GW solar farm, the country's largest, under construction.
Twitter was abuzz on Friday regarding the future of climate legislation as well. The minute Donald Trump was sworn in as president of the United States, WhiteHouse.gov was updated, notably pulling down a page on climate change and replacing it with a page vowing to increase oil and natural gas drilling. Solar companies are in a new policy world with Trump as president, so investors will need to buckle up for the ride, because it's officially begun.