Solar stocks seem to be on the rise this week on little more than a mention from President Donald Trump about incorporating solar panels into his proposed wall at the Mexican border. The project may never even be built, but it's bringing positive attention to the solar industry -- a welcome break for solar investors, who've had a rough couple of years.
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There was also some real news in the industry -- and it's mostly positive for once. Here are the highlights from the week in solar.
A powerhouse in energy
Enel Group has long been a giant in renewable energy and has a total portfolio of 85 GW of energy assets. This week, it announced the acquisition of EnerNOC (NASDAQ: ENOC) for $300 million, or $7.67 per share, to get into the demand response business.
We're seeing energy companies expand their capabilities from generation to storage, and now into demand response. Long term, this could build the kind of flexible utility that will be the future of energy, making Enel Group a company to watch in renewable energy.
Yieldco with a new lease on life
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Pattern Energy Group (NASDAQ: PEGI) got a big boost this week when it got a commitment for up to $1 billion in new capital from Pattern Energy and institutional investors tied to Riverstone Holdings. The company also expanded its pipeline to 10 GW, ensuring enough projects to grow the dividend over the long term, assuming the dividend yield is low enough to buy projects accretively.
The assurance that Pattern can fund growth should also ensure that it won't fall into the yieldco death spiral. Yieldcos rely on a low dividend so they can issue debt and shares to buy projects that are accretive to the dividend over the long term. If the dividend gets too high, they struggle to buy projects, dividend growth stops, and the stock slumps. Pattern Energy has recovered in part because of this new funding, and that should ensure that this is a viable yieldco for years to come.
Microgrids are here
Electric industry supplier ABB (NYSE: ABB) announced that it's building a microgrid that will support Aruba's transition to renewable energy. Aruba has a goal of getting half of its energy from renewable sources by 2020 and the other half from alternative fuels. ABB's advanced control system with load shedding and energy storage will keep the grid operationing with these variable energy resources.
Microgrids are going to be an important development in the future of the grid, allowing for more renewable energy penetration on islands or in small communities around the world that aren't connected to the grid. And major companies like ABB are seeing a growing opportunity in developing them.
NextEra Energy has its sights set on solar growth
One of the biggest investors in renewable energy in the U.S. has been NextEra Energy (NYSE: NEE), along with its yieldco, NextEra Energy Partners (NYSE: NEP). The companies already have 14 GW of wind and 2 GW of solar assets, but plans are to accelerate renewable investment, particularly in solar energy.
At a presentation with analysts, NextEra Energy Resources said it plans to build 1.4 GW to 3.8 GW of solar by 2020 in addition to its utility Florida Power & Light's plans for $2.8 billion in solar investments. It is making these investments because wind is currently the lowest-cost option, and solar will be more appealing as wind subsidies roll off by 2020.
For solar companies, becoming a preferred supplier for NextEra Energy would be a big win. One company I'm watching is SunPower (NASDAQ: SPWR), which announced a 125 MW supply agreement with NextEra using its P-Series solar panels. P-Series and the Oasis utility-scale solar platform are SunPower's best chances at near-term growth and profitability, so NextEra's growth plans could be good news for the company.
News and notes
Here are a few more notable developments from the week in solar:
- Sunrun (NASDAQ: RUN) announced that it's expanding into Florida, which has long been a very difficult state for the solar industry. But voters have backed solar in Florida, and the growth of cash and loan sales for residential solar power systems have made it an attractive growth market for companies like Sunrun.
- Canadian Solar (NASDAQ: CSIQ) announced that it has sold 80% of the 115 MW Pirapora II solar project in Brazil to EDF Energies Nouvelles. The sale should free up some cash and reduce leverage on Canadian Solar's balance sheet.
- EDF Renewable Energy signed a power purchase agreement with Southern California Edison to supply energy from a 500 MW solar plant near Desert Center, California. We don't yet know who will supply components for the project, but this is another mega solar project in the U.S. Southwest, and it shows that there's still plenty of demand for big solar projects.
That's all for this week in solar. Check back to fool.com for more coverage over the next week.
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