Zacks Industry Outlook Highlights: SolarCity, SunPower, Sempra Energy and Duke Energy
CHICAGO, Oct. 4, 2013 /PRNewswire/ -- Today, Zacks Equity Research discusses the U.S. Alternative Energy, including SolarCity Corporation (Nasdaq: SCTY-Free Report), SunPower Corp. (Nasdaq: SPWR-Free Report), Sempra Energy (NYSE: SRE-Free Report) and Duke Energy Corporation (NYSE: DUK-Free Report).
Industry: Alternative Energy
Environmental advantage: Solar power is the most benign electricity resource. Solar cells generate electricity without air or water emissions, noise, vibration, habitat impact or waste generation. Over time, rapid population growth, depletion of non-renewable conventional sources, and escalating pollution levels will help shape a much more pronounced global focus on renewable projects.
Fuel risk advantage: Unlike fossil and nuclear fuels, alternative energy has no risk of fuel price volatility or delivery risk. Although there is variability in the amount and timing of sunlight in the day, season and year, a properly sized and configured system can be designed to ensure high reliability while providing a long-term, fixed-price electricity supply.
Among the renewable energy pack, we would advise investors to look for companies like rooftop solar energy systems provider SolarCity Corporation (Nasdaq: SCTY-Free Report) with an innovative game plan. The downstream solar company plays on its strength providing renewable power lower than the grid price to residential and commercial markets in the U.S.
Again, Zacks Ranked #1 (Strong Buy) company SunPower Corp. (Nasdaq: SPWR-Free Report) is one of the most forward-integrated solar companies, focused on moving up the value chain. The company delivered strong second quarter results, swinging to profit from the loss incurred in the year-ago quarter. Its stellar results were backed by strong demand for its solar panels in utility, commercial and residential projects. During the quarter, the company's total production improved 42.3% sequentially while utilization reached 100%.
Location advantage: Unlike other renewable resources such as hydroelectricity and wind power, solar power is generally located at a customer's site due to the universal availability of sunlight. As a result, solar power limits the expense and losses associated with transmission and distribution from large-scale electric plants to the end users. For most residential consumers seeking an environment-friendly power alternative, solar power is currently the only viable choice.
Environmental legislation: Alternative energy companies are increasingly benefiting from new legislation in the U.S. stipulating installation of renewable sources of electricity generation as mandated by Renewable Energy Standards (RES). As of now there are 29 states, the District of Columbia in the U.S. and 2 territories that have RES legislation in place. Another 8 states and 2 territories also have goals for adoption of renewable energy sources.
At the federal level, Congress has extended the 30% federal investment tax credit (ITC) to both residential and commercial solar installations until Dec 31, 2016. Also, under the American Reinvestment and Recovery Act (ARRA), the U.S. Treasury Department had earlier implemented a program to issue cash grants in lieu of investment tax credit for renewable energy projects.
The wind sector has also benefited significantly from the production tax credit (PTC) over the last few years. It was started in 1992 as a part of the Energy Policy Act of 1992. Subsequent to that it has received life extension of half a dozen times. In the first decade of a renewable energy facility's lifespan, the PTC provides a $0.022/kilowatt-hour investment tax credit benefit.
Earlier this year, the renewable electricity PTC was extended for one year. This extension would ensure significant wind capacity additions over the next three years, thereby leading to higher generation from wind.
Need for a pollution-free environment: Globally, utilization of renewable energy is rising primarily due to its clean nature and a growing awareness among the masses regarding its benefits. This has influenced utility providers, like Sempra Energy (NYSE: SRE-Free Report) and Duke Energy Corporation (NYSE: DUK-Free Report), to gradually shift their mode of power generation to solar, wind and water.
Duke Energy's business unit, Duke Energy Renewables, is a leader in developing innovative wind and solar energy solutions. Since 2007, Duke Energy has invested more than $3 billion to expand its portfolio of wind and solar power projects. Currently, the company owns and operates approximately 1,700 MW of renewable energy, which includes 1,600 MW of wind power and 100 MW of solar power. In order to expand the use of renewable energy, the company is also developing an expertise in advanced technologies like the groundbreaking Notrees Battery Storage Project.
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