Zacks Industry Outlook Highlights: Yingli Green Energy Holding, Trina Solar, JA Solar Holdings, Canadian Solar and SunPower

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Sep 24, 2014, 09:30 ET

CHICAGO, Sept. 24, 2014 /PRNewswire/ -- Today, Zacks Equity Research discusses the Alternative Energy, including Yingli Green Energy Holding Co. Ltd. (NYSE:YGE-Free Report), Trina Solar Ltd. (NYSE:TSL-Free Report), JA Solar Holdings Inc. (Nasdaq:JASO-Free Report), Canadian Solar Inc. (Nasdaq:CSIQ-Free Report) and SunPower Corporation (Nasdaq:SPWR-Free Report).

Industry: Alternative Energy

Link: http://www.zacks.com/commentary/34530/alt-energy-up-on-emerging-markets

The demand for alternative energy is growing rapidly for electricity generation in the U.S., accounting for nearly 40% of all new, domestic power capacity installed last year. Driven primarily by the growth in wind and solar photovoltaics (PV), alternative energy will likely become the world's second most important source of electricity apart from coal by the next five years.

Although some better-established sources of alternative energy, like hydro, wind, biomass and waste, not to mention solar PV, are supported extensively, niche renewable energy sources such as geothermal and concentrated solar power (CSP) are also on the rise, natural conditions permitting.

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 as well as 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 after a tough spell from 2011. 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.

Again, 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 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.

Per the Solar Energy Industries Association (SEIA), the U.S. trade association of approximately 1,000 companies in the solar energy industry, the U.S. solar energy industry grew 21% year over year to reach 1,133 megawatt (MW) in the second quarter of 2014. This marked the fourth-largest quarter of solar installations in the history of the market, buoyed by the utility solar PV market, which installed 625 MW in the quarter, up 15.1% year over year. In the first half of 2014, 53% of all new electricity generation came from solar energy.

The first quarter of 2014 was an astounding period for CSP growth given the completion of the 392-MW Ivanpah project and the second 125-MW phase of the Genesis Solar project. However, Q2 did not see any CSP projects coming online. Yet, commissioning work continues at Crescent Dunes and a total of 857 MW is slated for completion by 2014 end. This will make 2014 the biggest year ever for CSP. SEIA expects PV installations to reach 6.5 GW this year, up 36% over 2013 and more than three times the market size of just three years ago.

Indeed the PV market is fast becoming global. According to the European Photovoltaic Industry Association (EPIA), a worldwide industry association for the solar photovoltaic electricity market, the cumulative global installed PV capacity stood at almost 136.7 gigawatt (GW) at the end of 2013, up 35% from the prior year. Europe is gradually losing its leading position in the PV market with Asia taking the lead.

A Look at China's New Policy for More Distributed Solar: China, the world's prime manufacturer of solar panels, is emerging as the leading market for solar photovoltaic (PV) to meet the growing need for clean energy. The Chinese government announced new policies to encourage local governments to promote more solar installations on home and business rooftops, and ground mounted plants of up to 20 megawatt (MW). China installed a record 12 GW of solar panels in 2013, making it the world's largest solar market in 2013, overtaking longtime leader Germany.

China's National Energy Administration has called on local governments of all regions to focus on distributed generation, to reform and reinforce feed in tariffs, provide additional financial incentives, and fast track connections.

During the first half of 2014, China added 3.3 GW of solar capacity, as per a National Energy Administration statement. This included 2.3 GW of utility-scale capacity and roughly 1 GW of distributed-generation PV. China, the world's largest carbon emitter, has set a goal of 35 GW of installed solar power by the end of 2015.

The following leading Chinese solar stocks are sure to make the most of the favorable government stimulus: Yingli Green Energy Holding Co. Ltd. (NYSE:YGE-Free Report), Trina Solar Ltd. (NYSE:TSL-Free Report) and JA Solar Holdings. Inc. (Nasdaq:JASO-Free Report).

Ontario, Canada-based solar product manufacturer Canadian Solar Inc. (Nasdaq:CSIQ-Free Report) is also well positioned with its diversified manufacturing base and project portfolio in Canada, China, Japan and the U.S. The company, like its U.S.-based peer SunPower Corporation (Nasdaq:SPWR-Free Report), is currently expanding its operations in Asia, primarily in China and Japan, encouraged by increasing solar uptake in these countries.

Recently, its wholly owned subsidiaries planned to team up with Sichuan Development Investment Management Ltd. (Sichuan Development) along with third party investors to form an investment fund, worth $800 million (RMB5 billion), in China. The fundraising primarily aims to promote construction, development and ownership of utility-scale and distributed generation solar power projects in Sichuan Province, China as well as other locations in the country.

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