We are just beginning to scratch the surface of the potential for solar energy, both in the U.S. and around the world. And a recent presentation on the industry's outlook by Shayle Kann of GTM Research described a path to $2.8 trillion in solar power investments globally between now and 2035.
Even with that enormous amount of investment, Kann is estimating that solar would provide just 17% of the world's energy, up from around 2% right now. For solar companies, the growth curve may be just starting.
How to get to a $2.8 trillion opportunity
In a presentation last week, Kann said that solar growing to provide 17% of electricity globally by 2035 is a fairly reasonable assumption, given how cost effective it already is today. If that happens, the industry's annual sales will grow from the approximately $87 billion made in 2016 to about $250 billion in 2035, leading to a cumulative installation over that period of 3,000 GW of solar power systems at a cost of $2.8 trillion.
To put these numbers into a bit of perspective, SunPower (NASDAQ:SPWR) deployed 1.3 GW of solar in 2016, First Solar (NASDAQ:FSLR) produced 3.1 GW, and Canadian Solar (NASDAQ:CSIQ) shipped 5.2 GW. These are three of the biggest manufacturers in the world, and at their current production levels, it would take them 313 years to produce 3,000 GW worth of solar systems.
Whether you're looking at it from a dollar or volume perspective, that suggests enormous growth opportunities ahead for companies that can build strong market shares in solar. And these three are companies I would watch.
Utilities could play a bigger role in solar ownership
Another interesting takeaway from Kann's presentation was where the funding in this industry is coming from. As solar projects are built, they need to be financed in such a way that their investors can make money on them -- a result that hasn't always been easy for solar developers to achieve. And in the U.S., utilities are seeing solar as a bigger and bigger option for growth.
The map below details the solar integrated resource plans (IRP) of utilities across the country. Dominion (NYSE:D) has been surprisingly aggressive, increasing its solar IRP from 949 MW in 2016 to 4.1 GW in 2017, all to be built by 2031. It's if you go out to 2042, that the number increases to the 5.5 GW you see below.
Given how rapidly these companies' solar plans are developing, and how relatively cheap it is as an energy source, we will likely see these numbers increase as well. And if utilities can build solar under their assets that are rate based to customers they'll lock in profits from their growing solar plans.
Solar's growth has just begun
Whether you're looking at the solar industry from the viewpoint of a manufacturer, a developer, or a utility, the opportunity is tremendous -- even if the industry falls short of the $2.8 trillion in investment projected by GTM Research. And the way the industry is shaking out, lots of players could benefit. This is the single biggest growth opportunity in energy today, and investors should start taking it seriously, because solar energy isn't going anywhere.
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