Special Report: Three Big Profit Opportunities in Solar

While 2016 is shaping up to be a historically bad year for oil, it's proving to be a monumental year for solar.

The Solar Energy Industries Association projects a total of 11.8 gigawatts of utility-scale solar photovoltaic installations will be added this year. That would outpace both natural gas and wind in terms of growth.

And that's just utility-scale solar farms.

Add in rooftop systems, and you get another 4 gigawatts of residential and commercial solar additions.

That's over 15 gigawatts in total.

In other words, U.S. solar isn't just going to top 2015's record 7.3 gigawatts of total new photovoltaic capacity — it's going to double it.

Furthermore, the U.S. is set to overtake Japan as the second largest solar market in the world.

This growth is truly remarkable.

Consider that total U.S. solar installations now exceed 25 gigawatts. That's equal to about one quarter of the country’s nuclear fleet, and up from 2 gigawatts just five years ago.

Given that it's no wonder that visionary entrepreneurs like Elon Musk and Warren Buffett are racing to outdo one another with large-scale solar investments.

Buffett alone has invested $15 billion in solar and wind projects, through various subsidiaries. And he says he's got another $15 billion loaded up. And Musk, the Tesla Motors mogul, is chairman of one of the country's fastest-growing solar companies.

And yet, this is just a small part of a much bigger picture, because solar is catching fire all around the globe.

Global Growth

China, the world leader, is expected to install approximately 19.5 GW of solar capacity in 2016, a 14.7% increase over 2015.

Furthermore, Beijing may raise its 2020 solar target from 100 GW to 150 GW. That would bring another 21 GW of annual installation over the next four years.

China has also pledged to reach an ‘emissions peak’ around 2030 with non-fossil fuels making up 20% of the nation’s energy generation.

Remember, this is a country that is desperate to cast coal aside and address its pollution epidemic.

The sulfur dioxide has made China's acid rain problem the worst in the world. And along with the CO2, it's contributed to a huge spike in lung cancer and other respiratory diseases.

More than 260,000 deaths annually are attributed to China's coal pollution.

And that says nothing of the emissions' contribution to climate change, which is significant.

Solar, along with nuclear power, is a big part of addressing this issue.

India is in the same boat.

Its installed solar capacity will top 9 GW this year, up from 2.7 GW just two years ago. And the Indian government recently raised its national solar installation target from 22 GW to 100 GW by 2022, tabbing $100 billion of investment.

Even traditional oil powerhouses are dumping crude in favor of solar...

Saudi Arabia's chief renewable energy developer, Acwa Power International, acquired Sunrise Solar Energy Psc, a company that is building a 50-megawatt solar power plant in Jordan.

All told, Saudi Arabia is investing more than $100 billion in solar energy. The Kingdom plans to get at least one-fifth of its electricity from solar by 2032, with 41 GW of capacity.

The UAE is planning to generate the vast majority of its electrical energy from solar and nuclear by 2050.

Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, wants solar panels on every roof by 2030. The Dubai Clean Energy Strategy aims to provide 7% of Dubai’s energy from clean energy sources by 2020. It will increase this target to 25% by 2030 and 75% by 2050.

Kuwait has announced plans to generate 15% of its energy needs via renewable sources by 2030. The first of up to 100 solar-powered fueling stations will begin operations by 2017.

It's pretty much an arms race at this point, with all these oil-producing countries racing to build capacity. Indeed, with oil on the way out, their ultimate goal is to generate so much solar power that they can export it, and continue to dominate the energy market the way they have for centuries.

Solar 100

Finally, in Europe, solar capacity grew by 15% in 2015, with 8 GW connected to the energy grid.

In all, global grid-connected solar increased 25% to an estimated 50.1 GW in 2015, up from 40.2 GW in 2014.

Global solar installations will reach 64.7 GW in 2016. And it's going to keep rising, and rising, and rising from there.

So, how can you profit?

Profit Opportunities

There are a great many ways to profit from Solar.

First Solar (NASDAQ: FSLR) is a standard. It's been very active in the U.S. It recently got a huge bump last year when it signed a $850 million deal with Apple.

Better still, the company's profits are rising due to huge increases in efficiency. It's squeezing more energy from each panel installed, and cutting costs on installations.

During the most recent quarter, First Solar reported sales of $942 million, a gross profit margin of 24.6%, and net income of $164 million, or $1.60 per share. Production was up 50% year-over-year to 761 MW in the quarter and efficiency increased 170 basis points to 16.1%. And cash increased to $1.83 billion. That's crucial for the company's ability to build projects.

JinkoSolar Holdings (NYSE: JKS) is another good option if you're looking for exposure to China.

The company specializes in low-cost production and supply of solar panels with operations spanning across Europe, North America, and Asia. It's the third-largest solar module producer in the world.

Jinko didn't kill in its last earnings report the way First Solar did, but the company still did pretty well for itself.

Jinko reported its FY2015 results on March 1, with net profit rising 2% year-over-year

The company's guidance suggests 1.3-1.4GW of solar modules will be shipped in the first quarter of 2016. That's a 78% increase from a year ago. For the full FY2016, module shipments could reach 5.4-5.7GW, which implies another 32% year-over-year volume increase.

Another company I like is SolarCity Corp. (NASDAQ: SCTY) — the solar panel manufacturer for which Elon Musk serves as Chairman.

SolarCity is combining forces with Musk's Tesla venture to create home power systems that store solar energy in batteries. This essentially makes homes self-sufficient in terms of energy.

SolarCity is already taking orders and installing these new systems. The storage units themselves sell for $3,000-$3,500. And they can be packaged with solar panels for $11,000-$40,000, based on how much power is needed.

SolarCity has grown its customer base from 48,000 in 2012 to just shy of 200,000 customers today. At that rate the company will have more than 1.5 million customers by 2018.

And these are just three companies in a bustling sector.

If you look at other solar investment opportunities, and you should, keep an eye on these five characteristics...

1) Government Support

2) Low Cost

3) Branding

4) Efficiency and R&D Dollars

5) Low Debt

You might also consider the Guggenheim Solar ETF (NYSE: TAN). It offers exposure to a wide range of solar companies, diversifying investors' exposure.

Whatever you choose, you'll want to get in on the solar phenomenon. It's the future of energy.


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