Recent reports from Australia’s leading energy companies show they’re making solar power a priority.
Last week, Origin [ASX:ORG] told investors they want to grow their solar services and capabilities. They pointed out that ‘falling systems costs makes solar PV competitive with or without subsidies.’ And that ‘utility scale solar has a shorter development timeframe’ than other renewable energy sources.
In February, AGL [ASX:AGL] reported on two big new solar plants they’ve got under construction. Their Nyngan solar plant will have a production capacity of about 102 megawatts. Their Broken Hill plant will do about 53 megawatts.
So why solar power? Well, according to the Clean Energy Council, solar power technology is getting better and cheaper. Other renewables aren’t getting much cheaper. And fossil fuels are getting more expensive.
Insight from the Council
Early this month, the Clean Energy Council released their ‘Clean Energy Australia Report 2014’.
According to them, commercial solar power adoption is ramping up just as much, if not more, than large-scale solar. The Report said that ‘Many new systems over 10 kilowatts were installed across the country during 2014, including an impressive $1.3 million solar power system installed at Mars Confectionery in Ballarat…Swedish furniture giant IKEA announced in 2014 that it will install 3.9 megawatts of solar power across its east coast stores and warehouses…The increasing number of commercial solar power systems installed by businesses has been one of the shining lights of the market over the last 12 months. As solar companies offer more innovative funding models where they offer to carry much of the risk and deliver a guaranteed return to commercial clients, this expansion is expected to continue.’
That’s good news for system suppliers chasing those big commercial contracts. But there was even bigger news for households. The Council’s outlook for the next decade said:
‘The introduction and use of smarter energy technology over the next decade will help to improve the interaction between onsite renewable energy generation, home energy use, electric vehicles, appliances and the power network. Energy storage and its interaction with the network will be a critical part of this.
Currently the biggest barrier to the wider adoption of storage is the price [but] Tesla has predicted a drop in the price of its lithium ion battery packs by more than 30 per cent by 2017.’
So in the near future, you could be getting a fair chunk of your electricity, at home and at work, from solar stored in batteries.
Morgan Stanley agrees. They’re bullish about solar-adjacent technologies. Last month, they said ‘Battery adoption should follow solar adoption patterns (literally and figuratively) which, in our view, suggests a market of about 2.4 million NEM households…especially seeing as around 1.1m households in the NEM could ‘retrofit’ their existing solar systems with batteries, especially where legacy Feed-in-Tariff schemes are set to expire.’
The battery they’re both referring to is the Powerwall home battery from Tesla [NASDAQ:TSLA]. It’s due to be delivered in Australia late this year. The Powerwall stores electricity generated by solar panels. But it can also take power from the grid at cheap ‘off-peak’ times, and store it for later.
The Powerwall has an impressive capacity. Just yesterday, Tesla boss Elon Musk said ‘we’ve dramatically increased the power capability of the Powerwall…it’s actually going to go from having 2kW steady, 3.3kW peak to a 7kW power, 5kW steady. Price is unchanged.’
The price varies, depending on who you ask. But according to Musk, it’s going to be about US$4,000 plus installation. So that’s around $5,150 in Aussie dollars. To put that in perspective, battery systems currently available in Australia can cost upwards of $20,000. This means going ‘off the grid’ (or close enough) is currently only accessible for the relatively wealthy.
But when the Powerwall is introduced, that will change. And if the price drops as the Council expects, it’ll make solar more affordable for everyone. Analysts from UBS say a Powerwall could pay for itself and start providing a return in around six years.
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But back to Morgan Stanley’s predictions. They think households that already have solar will buy batteries. But they also think battery technology could bring in more solar customers. So it’s potentially good news for the solar industry in Australia.
Is it time to buy?
Some analysts think it’s a good time to buy solar company stocks. But they might be biased. Nathan Lim is a portfolio manager at Australian Ethical Investment. He says that ‘Increasingly affordable solar power is driving unprecedented global demand that has resulted in annual growth of 43 per cent over the past 10 years…Companies providing goods and services to meet this demand have a bright future.’
US firm Zacks says China’s new solar target will make a difference as well. In late March, China’s National Energy Agency (NEA) revealed it wants to install 17.8 gigawatts of solar capacity by the end of the year. It’s all about reducing their notorious pollution levels. Emerging market analyst Ken Wangdong covered the issue here. He frequently discusses solar power in his commentary on China’s economy.
Chinese solar companies are obviously well-placed to benefit. But there are a number of foreign companies that could receive some NEA business too. Many foreign companies have manufacturing facilities within China. Including Aussie solar companies.
There are lots of different ways you can gain exposure to solar through the ASX. In his report ‘The Five Best ASX Stocks for 2015’, Kris Sayce discusses an Aussie company which owns Australia’s premier brand of solar roof tiles. He believes this company will continue to grow revenue and profits as the Aussie property market continues its climb. Click here to find out how to get your free copy of ‘The Five Best ASX Stocks for 2015’.
How have listed solar companies performed this year?
Here’s a small sample of ASX listed companies with interests in solar.
EnviroMission [ASX:ENV] makes solar towers. Each one has ‘the capacity to supply renewable energy to more than 100,000 typical American households.’ While they don’t yet have a plant here, Australia is one of their top three target markets. EnviroMission stocks have gained 97.37% so far this year.
Dyesol [ASX:DYE] develops and makes dye solar cells. The structure of these cells mimics the capture of energy through photosynthesis. As a third-generation solar product, they’re expected to be used as an integrated building material, like a cladding panel or a window pane. Dyesol stocks have gained 7.14% this year.
Infigen Energy [ASX:IFN] is a specialist renewable energy provider. In addition to their wind farm projects, they’ve got a large-scale solar farm up and running in NSW. It has a proposed operating capacity of 50 megawatts — nearly as much as AGL’s new plant. Infigen stocks have gained 14.58% this year.
Source: Google Finance
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Eva Mellors
Contributor, Money Morning