Solar energy stocks have taken the markets by storm in what is turning out to be a breakout year after a long stretch of underperformance. The stocks are up by an average of 40% on improved market sentiment. This is a result of enhanced performance as well as projections for long-term growth.
Growing Solar Demand
Some of the energy stocks providing greater exposure to the expanding sector include SunPower Corporation (SPWR), First Solar, Inc.(FSLR), Sunrun Inc. (RUN) and JinkoSolar Holding Co., Ltd. (JKS).
With solar installations in 2019 set to make record highs of 141GW the companies look set to generate significant profits. This is in light of the fact that installations were 109 GW in 2018. Solar energy generation is poised to improve from 260,000MWh/d as of last year to 290,000MWh/d [1] in 2019 according to the US Department of Energy
Demand for solar panels is not only strong in the U.S but also in some of the biggest economies in the world. China is one of the markets where demand for solar panels looks set to continue supporting solar companies. Saudi Arabia, India, and Chile are other markets where demand for solar panels is also on the rise.
Growing demand for solar panels could result in a spike in profits for the likes of First Solar, SunPower, and JinkoSolar. These companies account for most of the orders. As the industry expands, price pressure should subside as large companies will be able to leverage economies of scale.
Solar Panel Differentiation
First Solar has moved to strengthen its competitive edge in pursuit of more orders by unveiling Series 6 technology, capable of lowering costs and squeezing in more power on every solar panel. SunPower, on its part, has expanded to A-series production. The company aims at improving the panel’s efficiency by 22%.
JinkoSolar has strengthened its edge in the Chinese market by upgrading its cell capacity. Jinko is producing PERC technology panels that are more efficient than other technologies in the market [2].
Technology improvements should allow solar energy companies to attract bulk orders. This is in light of the demand for renewable energy in both industrial and residential settings continuing to surge. Differentiation could also lead to improved margins, which are expected to lead to higher profits.
It is for these reasons that investors remain optimistic about the outlook on solar energy stocks and one of the reasons why solar stocks are moving higher.
Endnotes:
[1] https://cleantechnica.com/2019/02/24/2019-us-solar-market-outlook/[2] https://www.ecogeneration.com.au/jinko-solar-takes-out-fifth-consecutive-award-for-panel-yield/
