A number of factors are fueling the need for new solar projects, including corporate buyers, state requirements, coal plant retirements, and lower costs for equipment and construction. The rise of sophisticated storage assets has also made solar more attractive, since solar-plus-storage projects can bank power to use when the sun is not shining. The U.S. Energy Information Administration expects 13.5 gigawatts (GW) of solar capacity to come online in 2020, surpassing the previous record of 8 GW in 2016.
Here's a solar module maker, a diversified utility, and an evolving oil major that may warrant a closer look.
Image source: Getty Images.
The high-tech module innovator
Canadian Solar (CSIQ -1.22%) is a large-scale manufacturer of solar panels that has delivered over 38 GW of modules to customers in more than 150 countries since the company launched in 2001. The company is active in many phases of the solar value chain, owning, operating, and selling utility-scale projects as well as providing residential solar installation. Canadian Solar's Recurrent Energy development unit also has approximately 7 GW of solar and storage projects in development in the U.S.
Investors should consider the company right now based on its introduction of new technology that is likely to fuel some large new sales, as evidenced by a multiyear module supply agreement announced earlier this month. The company reached a deal with Lightsource BP, an affiliate of the U.K.-based oil giant BP (BP 0.38%), to deliver 1.2 GW of its new, high-efficiency polycrystalline solar modules for projects in the U.S. and Australia. The deal covers what are known as bifacial modules, which generate power from both the front and the back to increase power output and decrease the cost of electricity.
For Q3, Canadian Solar's total solar module shipments were at more than 2.3 GW, up from more than 2.1 GW in the prior quarter and exceeding the company's guidance. Revenue and earnings per share declined sequentially for the quarter, which the company attributed to fewer asset sales.
Canadian Solar has a market capitalization of over $1 billion and does not pay a dividend. The company has underperformed the S&P 500 by more than 10 percentage points over the past year but recently put some new initiatives in place to maximize shareholder value. The company expanded its board, adding a new director, and brought in a veteran energy investor as a strategic adviser.
The solar storage play
AES Corporation (AES -0.70%) deserves a look because the company has shown it understands the importance of combining solar projects with storage, and these hybrid projects are seeing more demand. The company is active in renewable and traditional power generation, transmission, and distribution in 14 countries and has been developing solar and solar-plus-storage projects since 2009. Earlier this year the company opened the world's largest battery plant paired with solar generation on the Hawaiian island of Kauai.
With a market capitalization at more than $13 billion and a dividend yield of more than 2%, an investment in AES would offer investors a chance to get in on solar and battery development with the benefit of more traditional utility-based revenue streams.
The oil major with a solar subsidiary
Total (TTE 0.26%), a French oil major, is probably not the first name that comes to mind when most people think of renewable energy. But the company holds interests in more than 3 GW of operating renewable power and owns utility-scale solar in Japan, South Africa, the United Arab Emirates, and Chile. The company also holds a controlling interest in SunPower (SPWR), a commercial and residential solar developer that improved its financial condition over the year, resulting in a share price increase of more than 50%.
Solar is a small piece of the overall picture for Total, since the company has a market capitalization greater then $130 billion and a massive pool of assets in multiple businesses around the world. But with a dividend yield of more than 6%, the company represents an opportunity for the more conservative investor to benefit from solar upside but also get the diversification of oil and gas, petrochemical, and other renewables assets.
