Most of the market was quiet during the Fourth of July week, but there's never a dull moment in the solar power industry. A few weeks ahead of earnings season, we're getting some indications that results from the sector may not be as bad as expected.
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Outside of projecting earnings, Elon Musk made another splash this week that wasn't directly solar related, but that could help the industry long term. Here's a rundown of key news for investors.
Component prices on the rise?
Price details of solar panels are rarely published, so despite the fact that they're vital to solar manufacturers' financial results, it's tough for investors to gauge where prices are headed. PV Magazine reported this week that second-quarter and early third-quarter 2017 pricing may be much better than expected due to the confluence of a few factors.
- In China, some projects that were expected to be built before tariff pricing is adjusted in the third quarter were pushed into July. This means the expected decline in demand during the second half of the year will be postponed by at least a month.
- At the same time, U.S. developers are installing projects as quickly as possible ahead of the potential "Section 201" trade case coming down the pike. They're trying to get solar modules into the country and installed in case the economics of solar energy get blown up by the Trump administration. If the U.S. International Trade Commission and President Trump take a protectionist stance and impose high tariffs on imports, it could derail more than two-thirds of all solar installations over the next five years.
- The surge in U.S. demand coincides with the bankruptcies of two domestic solar manufacturers: SolarWorld and Suniva. Their loss leaves a gap in supply, compounded by U.S. tariffs that affect some suppliers in Asia that are picking up the slack.
- Finally, Europe's highest demand season is here, and SolarWorld's bankruptcy is creating solar panel supply shortages there too. And, as in the U.S., trade restrictions in the E.U. limit the ability of some Asian suppliers to sell profitably in that market.
The cumulative result is that solar panel prices are rising in the U.S. and Europe, according to PV Magazine. If that's true, it could mean that suppliers like First Solar (NASDAQ: FSLR) and SunPower (NASDAQ: SPWR) could see short-term boosts in demand because they can fill the demand gap with supply that's not trade restricted. Both companies had been anticipating poor financial performances in 2017, so this shift could lead to welcome surprises when they report second-quarter results.
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Tesla's next big energy storage project
Tesla (NASDAQ: TSLA) announced this week that it is developing the world's largest lithium-ion battery farm in Australia. Elon Musk has pledged the system will be up and running within 100 days of the contract signing, and given that it's a 129 MWh project, that's no small task. For perspective, that's enough energy storage to supply 11,931 average U.S. homes with electricity for an entire year.
Australia is well positioned to be a key proving ground for energy storage because it has a very high adoption rate of solar: One in four Australian homes now has solar energy. If energy storage on a large, or small, scale works economically there, it can work anywhere.
News and notes
Here are a few more notable items from the week in solar.
- Chile will have another power auction in October, which could be a big opportunity for solar energy. Rights to supply 2,200 GWh annually will be auctioned off in seven supply blocks. Solar won just 6% of last year's auction, but the structure should be more favorable to it this time around in an important Latin American market that already has 1.8 GW of solar generating capacity deployed.
- ReneSola announced that it connected over 180 MW of rooftop solar projects in China during the first half of 2017. The company was in a rush to beat expiring feed-in tariff rates; for context, a company that had that installation rate in the U.S. would by among the largest domestic rooftop solar installers.
- Royal Dutch Shell (NYSE: RDS-A) is drilling deeper into the renewable energy market with its deal to buy MP2 Energy this week. The company manages 1.7 GW of power assets, including 30 MW of solar, 550 MW of wind, and 40 MW of distributed solar. This could be a sign that the oil major wants to enter power markets that have more growth than oil, so it's worth keeping an eye on long term.
That's all for this week in solar. Check back to fool.com for more coverage next week, particularly ahead of a very important earnings season coming in late July.
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