Zacks Industry Outlook Highlights: JA Solar Holdings, Yingli Green Energy Holding, Ormat Technologies, Covanta Holding and U.S. Geothermal

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May 28, 2014, 09:30 ET

CHICAGO, May 28, 2014 /PRNewswire/ -- Today, Zacks Equity Research discusses the Alternative Energy, including JA Solar Holdings Co., Ltd. (Nasdaq:JASO-Free Report), Yingli Green Energy Holding Co. Ltd. (NYSE:YGE-Free Report), Ormat Technologies Inc. (NYSE:ORA-Free Report), Covanta Holding Corp. (NYSE:CVA-Free Report) and U.S. Geothermal Inc. (AMEX:HTM-Free Report).

Industry: Alternative Energy

Link: http://www.zacks.com/commentary/32731/alt-energy-shines-on-emerging-market-demand

Alternative energy is now an important component in the power generation mix in many developed and developing nations. Although some better-established sources of alternative energy, like hydro, wind, biomass and waste, not to mention solar photovoltaics (PV), are supported extensively, niche renewable energy sources such as geothermal and concentrated solar power (CSP) are also on the rise, natural conditions permitting. Specifically, 2013 was an excellent year for the U.S. solar market.

Other upcoming alternative sources include the prospect of harnessing sea power. Numerous new ocean power technologies are on the verge of commercial development. Although this form of renewable energy is one of the most notable, it involves technologies with high research and development and startup costs. This has inhibited its all-out adoption so far.

Solar

A major growth area in the renewable space is solar energy. With the increasing need for developing renewable energy in response to stringent environmental regulations, countries worldwide are relying on solar energy for electricity generation.

The solar industry rallied in 2013 following a tough spell since 2011. The U.S. Energy Information Administration (EIA) estimates that U.S solar demand increased more than 32% in 2013. For 2014, the EIA projects that U.S. solar energy consumption will boom by roughly 35%. The expected increase in demand is likely to fuel top-line growth at the solar manufacturers.

President Obama's new environmental plan, unveiled in Jun 2013, putting further limits on existing coal-fired plants, gave a shot in the arm to the U.S. solar sector. The results were well reflected in the 2013 performance. The president issued directives asking environmental regulators to set up carbon pollution standards for active plants. Coal generates about 40% of U.S. electricity and coal plants are the largest source of carbon emissions in the country.

As a result, the U.S. Environmental Protection Agency is issuing directives to lower carbon emission from newer coal-based power plants while strengthening the existing policies on green-house gas emissions. This development has emerged as a major headwind for coal-fired utility stocks and has proved to be beneficial for renewable energy stocks.

Wind

The American Wind Energy Association (AWEA) reported that the wind industry grew radically during the first quarter 2014. The U.S. industry installed 214 MW during the first quarter, up significantly from the year-ago installed capacity of 1.6 MW. The reported figure was also more than what the industry installed in the first three quarters of 2013. This brought the total installed capacity to 61,327 MW.

There were more than 8,000 MW of long-term power purchase agreements announced in 2013. EIA expects wind capacity to expand 9.0% in 2014 and 15.5% at the end of 2015. Electricity generation from wind is expected to contribute 4.5% to the total electricity generation basket by the end of 2015.

Hydro

Hydropower is considered the leading renewable energy source in the U.S. With the emergence of new technologies, like marine and hydrokinetics, this industry is likely to continue to generate vast amounts of sustainable energy throughout the country.

Hydropower is the cheapest source of electricity as it has the lowest cost per kilowatt hour compared to all other sources and is independent of the volatile movement in fuel costs. EIA projects that both hydropower and non-hydropower renewables used for electricity and heat generation will grow by approximately 3.3% in 2014.

In 2015, growth in renewables consumption for electric power and heat generation is projected to continue at a rate of 3.2%, as a 0.3% decrease in hydropower is combined with a 5.1% increase in non-hydropower renewables.

On Aug 9, 2013, President Obama signed into law two bills aimed at boosting the development of the nation's largest renewable electricity resource, hydropower. Enactment of laws is a prudent step to uphold hydropower development.

Zacks Industry Rank - Positive Outlook

We rank all the 260-plus industries in the 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. To learn more visit: About Zacks Industry Rank.

The way to look at the complete list of 260+ industries is that the outlook for the top one-third of the list (Zacks Industry Rank of #88 and lower) is positive, the middle 1/3rd or industries with Zacks Industry Rank between #89 and #176 is neutral while the outlook for the bottom one-third (Zacks Industry Rank #177 and higher) is negative.

Within the Zacks Industry classification, the Zacks Industry Rank for Solar is #92 out of 260. This corresponds to the middle one-third of the list, implying a neutral outlook.

The Zacks Industry Rank for the Other Alternative industry is #87 out of 260. This puts the industry in the top one-third of all industries.

Among the 15 companies in the solar industry under our coverage, JA Solar Holdings Co., Ltd. (Nasdaq:JASO-Free Report) holds a Zacks Rank #1 (Strong Buy) while Yingli Green Energy Holding Co. Ltd. (NYSE:YGE-Free Report) carries a Zacks Rank #2 (Buy). For 11 companies under other alternative energy industry, Zacks Ranked #1 (Strong Buy) stock Ormat Technologies Inc. (NYSE:ORA-Free Report) and Zacks Ranked #2 (Buy) stocks Covanta Holding Corp. (NYSE:CVA-Free Report) and U.S. Geothermal Inc. (AMEX:HTM-Free Report) are making the most of the favorable market dynamics.

Please note that the Zacks Rank for stocks, which is at the core of our Industry Outlook, has an impressive track record going back years, verified by outside auditors, to foretell stock prices, particularly over the short term (1 to 3 months).

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