Zacks Industry Outlook Highlights: Royal Dutch Shell, Total, Covanta Holding, Ormat Technologies and SolarCity
by PR Newswire
CHICAGO, Feb. 8, 2013 /PRNewswire/ -- Today, Zacks Equity Research discusses the U.S. Alternative Energy, including Royal Dutch Shell plc (NYSE:RDS.A), Total S.A. (NYSE:TOT), Covanta Holding Corporation (NYSE:CVA), Ormat Technologies Inc. (NYSE:ORA) and SolarCity Corporation (Nasdaq:SCTY).
A synopsis of today's Industry Outlook is presented below. The full article can be read at
A major growth area in this space is solar energy. The U.S. has a lot of catching up to do, despite enormous potential, to get anywhere close to the global leaders. Solar Energy Industries Association (SEIA) is the U.S. trade association of approximately 1,100 companies in the solar energy industry. Per the SEIA, in fiscal 2011, the U.S. solar energy industry grew 109% year over year to reach 1,885 MW, which represents 7% of all PV globally, up from 887 MW and 5% of global installations in 2010.
According to the SEIA, this unprecedented growth was spurred in part by declining installed solar photovoltaic (PV) system prices, which fell 20% in 2011 on the heels of lower component costs, improved installation efficiency, expanded financing options, and a shift toward larger systems nationwide.
As per the SEIA, bullishness in the U.S. solar market continued in the first three quarters of 2012 with new installations of 1,992 MW already surpassing 2011's annual total of 1,885 MW. Going forward SEIA forecasts that close to 1,300 MW of PV capacity will be installed in the fourth quarter of 2012 alone, bringing the total for the year to 3,200 MW.
As for wind energy, per the American Wind Energy Association (AWEA), the U.S. had a total of 60 GW of installed wind power at the end of 2012.
According to EPIA, the cumulative global installed PV capacity stood at almost 67.4 GW at the end of 2011, compared to only 39.7 GW at the end of 2010. The agency reports that almost 21 GW of this growth occurred in Europe. In fiscal 2011, the two biggest markets, Italy and Germany, accounted for nearly 60% of global market growth.
The number of markets reaching more than 1 GW of additional capacity during fiscal 2011 rose from 3 to 6. In 2010, the top 3 markets were Germany, Italy and the Czech Republic; in 2011, Italy led, followed by Germany, China, the U.S., France and Japan, each with over 1 GW of new capacity.
Here we take a look at the alternative energy space and attempt to identify this nascent industry's strengths and weaknesses.
Environmental advantage: Solar power is the most benign electricity resource. Solar cells generate electricity without air or water emissions, noise, vibration, habitat impact or waste generation. Over time, rapid population growth, depletion of non-renewable conventional sources, and escalating pollution levels will help shape a much more pronounced global focus on renewable projects.
The long-term bullishness is shared even by oil goliaths like Royal Dutch Shell plc (NYSE:RDS.A), who expect that by fiscal 2050 one-third of the global energy needs will come from renewable sources. And in the near term, Christophe de Margerie, the CEO of another oil company, Total S.A. (NYSE:TOT), expects crude oil prices to average $105–115 per barrel in 2013.
In this space we are bullish on waste management service provider, Covanta Holding Corporation (NYSE:CVA), which has tied the majority of its service contracts under long-term agreements with inflation escalators.
Fuel risk advantage: Unlike fossil and nuclear fuels, alternative energy has no risk of fuel price volatility or delivery risk. Although there is variability in the amount and timing of sunlight in the day, season and year, a properly sized and configured system can be designed to ensure high reliability while providing a long-term, fixed-price electricity supply.
In this context the one name we are bullish about is Ormat Technologies Inc. (NYSE:ORA), which engages in the geothermal and recovered energy power business.
In light of the Fukushima Daichi episode in Japan, the global focus has tilted towards solar in a big way. Germany plans to phase out nuclear power plants by 2022. This move will definitely boost solar fortunes in one of its largest global markets.
However among the renewable energy pack we would advise investors to look for companies like rooftop solar energy systems providerSolarCity Corporation (Nasdaq:SCTY) with an innovative game plan. The downstream solar company plays on its strength providing renewable power lower than the grid price to residential and commercial markets in the U.S.
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