US solar soared in 2016, but investors still leery
LOS ANGELES: New US solar installations nearly doubled last year, but slowing demand for both residential and large-scale systems, falling panel prices and concerns about looming federal tax reform are still dampening investor appetite for the sector.
Solar installations soared 97 per cent to 14.8 gigawatts in 2016, according to a report released on Thursday by Wood Mackenzie and the Solar Energy Industries Association.
The technology is cheaper than ever, with panel prices dropping 40 per cent last year, and many utilities procuring solar on the basis of cost alone.
But the dramatic drop in panel prices has hampered solar manufacturers’ profits and ramped up competition for utility-scale contracts among developers, companies said in recent weeks while reporting fourth-quarter results.
Add in a slowdown in the residential market, tax reform pushed by US President Donald Trump, climbing interest rates and falling oil prices, and stock market investors remain skittish about solar.
Credit Suisse analyst Andrew Hughes said in a client note on Thursday that the key risk to his ‘outperform’ rating on shares of residential solar player Sunrun was “investor sentiment, which in a rising interest rate and falling oil price market obscured by tax policy uncertainty remains tepid.”
The MAC Global Solar Energy index, which tracks shares of solar power companies, slid 43 per cent in 2016.
The index has recovered to gain nearly 8 per cent so far this year but remains 65 per cent below its year-ago level.
US module manufacturers and project developers SunPower and First Solar Inc are both viewing 2017 as a transition year for their businesses, they said after reporting in February losses for the fourth quarter of last year.
SunPower chief executive Tom Werner in a conference call predicted “intense competition for the forseeable future in mainstream power plants,” adding that some companies were selling panels at below cash cost.
Indeed, the solar industry report released on Thursday forecasts a slowdown in the market this year after last year’s boom. — Reuters