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This Week in Solar

By Travis Hoium - May 13, 2016 at 5:10PM

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This week solar earnings season hits full swing, batteries get hot, and another manufacturer defaults on its debt.

Image source: SunPower.

This week was full of earnings reports from SolarCity (SCTY.DL), Vivint Solar, Canadian Solar (CSIQ 0.00%), and Yingli Green Energy. Depending on how you look at it, the industry is either in trouble or growing at a really rapid rate.

Here's a look at what investors should take from this week's earnings reports and where investors should look in the future.

Earnings season takeaways

Earnings season has uncovered a few trends in solar that investors should take note of:

  • Residential solar growth isn't as strong as it was expected to be. This is a combination of the lack of urgency to sign contracts after the investment tax credit extension in December, regulatory uncertainty in some states, and market saturation. Notably, SolarCity reduced its 2016 installation guidance from 1.25 GW to 1.0-1.1 GW. It's worth watching if the industry transitions toward loans this year, and also how efficiency leader SunPower (SPWR -0.74%) performs versus vertically integrated competitors. SunPower was far more bullish on the industry, and that may be because it packs more power onto a rooftop, which may be desirable for customers going forward.
  • Utility-scale project developments will be hot in 2016, but 2017 is up in the air. First Solar (FSLR 0.68%), Canadian Solar, and SunPower all indicated that utilities have been slow in signing contracts for projects due in 2017. It's likely they'll look overseas for demand, but after this year is done, there is some uncertainty, especially in large-scale solar.
  • The fallout from SunEdison's bankruptcy should eventually be positive for solar competitors, but right now, the impact is unknown. It could take months for SunEdison's contracts to be sold or for utilities to decide to rebid them.

The big takeaway is that as much as solar is expected to grow in the next five years, there's still a lot of uncertainty in the industry. Rooftop demand isn't growing as fast as expected, and utilities seem to be hesitant to go all-in on solar next year. Those are big reasons the ride has been a bit bumpy on the stock market.

Image source: SunPower.

Batteries are getting some serious attention

Tesla Motors (TSLA 4.53%) introduced a new version of the Powerwall that makes installation easier and is compatible with SMA inverters, a market leader in residential solar. This is ahead of SolarCity saying it will expand Powerwall installations, eventually making it a standard product for its solar systems. As challenges to net metering continue, it'll be more and more important for solar companies to have battery solutions, so Tesla Motors improving its product is a good step forward.  

This week, Total also said it would buy battery maker Saft for $1.1 billion. Total owns a majority stake in SunPower and has made other small energy deals in renewable energy, a sign that it's slowly shifting its business long term. We don't know exactly what Total's long-term plans for Saft are, but the fact that a big oil company is getting interested in battery technology is good for the industry -- and a positive for solar energy and its intermittent energy production.  

Another solar manufacturer defaults

The record for the largest solar manufacturers in the world hasn't been a good one in the last five years. Q Cells and Suntech Power went bankrupt, and now Yingli Green Energy has defaulted on some of its debt.  

It's more common than you might think for solar manufacturers to go out of business, and holding the "largest in the world" title has been more of a warning sign than anything else. Canadian Solar will probably hold that title by the end of the year, so we'll see if it can do better than its predecessors.

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Stocks Mentioned

First Solar, Inc. Stock Quote
First Solar, Inc.
FSLR
$70.07 (0.68%) $0.47
Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$737.12 (4.53%) $31.91
SunPower Corporation Stock Quote
SunPower Corporation
SPWR
$17.36 (-0.74%) $0.13
SolarCity Corporation Stock Quote
SolarCity Corporation
SCTY.DL
Canadian Solar Inc. Stock Quote
Canadian Solar Inc.
CSIQ
$32.38 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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