Things are happening in energy investing, and solar power is poised to break from the pack, providing savvy investors with an opportunity to invest in the next economy, the future of the planet.
Energy generation from solar power continues to gain market share and is highly cost-competitive. The city of Palo Alto, California, for example, recently signed a solar power purchase agreement for just 3.7 cents per kilowatt-hour. In Dubai, unsubsidized electricity from large-scale solar generation sells for $0.0299 per kWh. That’s competitive with any form of fossil-based electricity.
Solar power usage is also growing rapidly. The U.S. solar industry installed a record 7.3 GW of solar photo-voltaic in 2015, and that volume is poised to grow 118% in 2016, with installations projected to reach 16 GW. China added 7.1 GW of new solar capacity in the first quarter of 2016 alone.
What makes solar so compelling? First, solar and fossil fuels are fundamentally different as energy sources. Fossil resources are commodities. The more demand, the more expensive they become. Solar is a technology-based energy source. Anyone who purchased a mobile phone or a TV knows that technology becomes cheaper as demand for it grows. The same is true for solar.
For investors looking to take advantage of sweeping changes to our energy infrastructure, we offer these solar stocks. All of these companies are currently undervalued relative to their prospects, despite having earnings, momentum, and revenue growth.
First Solar: FSLR - Tempe, Ariz.-based First Solar is the market leader in thin-film solar photo-voltaic technology. From a fundamentals point of view, the company has a wide moat around its IP and technology and leadership has been smart about executing on business. Growth comes from adding capacity without taking on an undue amount of debt and building a dominant position.
Sun Power: SPWR - SunPower is the most technologically advanced panel manufacturer. The San Jose, California based firm manufactures a panel that converts about 24% of sunlight into electricity. And its panels are warranted for 25 years, while the company expects them to last 40 years. SunPower has a healthy balance sheet and is adding capacity prudently to meet growing demand.
Canadian Solar Inc: CSIQ - Canadian Solar, headquartered in Guelph, Ontario, is for all intents and purposes a Chinese solar company. As one of the largest and most cost-competitive photo-voltaic panel producers in the world, Canadian Solar has grown bottom-line revenue at 20% a year over the past five years. While there is some international risk in investing with a Chinese firm, Canadian Solar is a great way to add diversification to a renewable energy portfolio.