A new report from Morgan Stanley Equity Research titled “Solar Power & Energy Storage: Policy Factors vs. Improving Economics” was published on Monday, July 28th. The report, put together by more than a dozen Morgan Stanley analysts including lead analyst Steven Byrd, elaborates on a new model that calculates solar economics around the world based on local regulatory dynamics and solar conditions.
Solar power growth overview
The Morgan Stanley report is anticipating a “combined solar growth for China, Japan, the US, Europe, India, and Brazil of 39 GW per year through 2020, and global demand of 47 GW.” The analysts also note they are positive on U.S. demand growth because of improving solar economics.
Byrd and colleagues also highlight the German “solar slowdown” in the report. The MS analysts projections for China are below industry forecasts because they think the Chinese government will keep solar growth close to nuclear and wind growth rates in order to achieve emission reduction goals. The analysts also argue the pending government review of solar subsidies in Japan in a gradual braking of solar power growth rates.
Energy storage technologies developing
Solar power experts have noted for several years that an efficient, inexpensive energy storage technology must be developed for solar power to really take off. The MS report points out that an efficient energy storage technology together with solar power “could disrupt utilities in the US and Europe to the extent customers move to an off-grid approach.” The MS analysts also point to Tesla Motors Inc (NASDAQ:TSLA)’s new large-scale storage technology as potentially game-changing. “We believe Tesla’s energy storage product will be economically viable in parts of the US and Europe, and at a fraction of the cost of current storage alternatives.”
Based on the conclusions presented in their report, the Morgan Stanley analysts recommend that investors consider solar power “integrators” [Sunedison Inc (NYSE:SUNE), SolarCity Corp (NASDAQ:SCTY), NRG Energy Inc (NYSE:NRG)], renewable Yieldcos [NRG Yield Inc (NYSE:NYLD), Nextera Energy Partners LP (NYSE:NEP), Abengoa Yield PLC (NASDAQ:ABY), and TerraForm Power Inc (NASDAQ:TERP)], and Tesla Motors Inc (NASDAQ:TSLA).
Stocks facing downside risk
The MS report also suggests that solar panel and polysilicon manufacturers [Wacker Chemie AG (ETR:WCH) (OTCMKTS:WKCMY), First Solar, Inc. (NASDAQ:FSLR), GCL-Poly Energy Holdings Limited. (HKG:3800) (OTCMKTS:GCPEF), Trina Solar Limited (ADR) (NYSE:TSL), Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE), Xinyi Solar Holdings Ltd (HKG:0968), and JinkoSolar Holding Co., Ltd. (NYSE:JKS)] are facibng downside risk, especially given the likelihood of declining demand in China and Japan. Byrd et al. also note thatU.S. utilities in sunny and/or high ultility rate states may be negatively impacted by the growth in solar power and energy storage.