Forest fires in California are heating up the solar battery outlook for these three shares – Motley Idiot
For the vast majority of US homeowners, residential power or battery was a catchy advertisement for a product "they would like to get one day". In California and several other states, a number of factors coincide that are changing the way many people think about batteries. And as the demand for batteries in the US grows, several companies leading in the field can reap the benefits.
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Energy storage in residential areas does not make economic sense. Until it is ready.
Household batteries are typically marketed as an optional add-on to a solar power system, as their additional cost often outweighs the savings on utility bills that panels can provide. However, this calculation has changed for several reasons.
In order to improve their bottom line, major utilities in California – the leading rooftop solar market – are starting to implement time of use rates (TOUs). TOUs make electricity cheaper during the day, but much more expensive in the evening. This is not so good for solar systems that sell most of their energy during the day – unless they have batteries. With batteries, solar systems can store the energy they generate and then sell it to the grid whenever it is most profitable. A study published by Solar Power World shows that a Solar Plus storage system outperforms a purely solar system if at least the TOU tariff of a large California energy supplier is used.
And California is improving the economics of some storage systems through programs like the Self Generation Incentive Program – a rebate program for low-income households and communities at risk of fire.
The initial success of these programs has taken note of other utility companies across the country, and many have begun testing similar TOU programs in large markets such as Florida and Texas.
While these programs have fueled interest in residential energy storage, the very unfortunate climate-related events of recent years in countries like California, Texas, Florida, and Puerto Rico have fueled demand for these products even more.
You don't know what you have until it's gone
Consumers expect a low price for reliable electricity. But they'll pay even more to make unreliable electricity reliable.
Following the infamous California fires in 2018, PG&E, the utility responsible for starting some of the worst fires, announced planned blackouts to keep fires from breaking out in the hottest months of 2019 and 2020. These blackouts affected millions of people and sometimes lasted days. According to PG&E, planned blackouts in California could be "the new normal" for at least a decade.
These types of climate-related blackouts have brought energy storage in homes in the US to a turning point. Storage accumulation rates – the percentage of solar systems that also choose to install batteries – is likely to increase six-fold from 2019 to 2025.
The main players in this area should expect a godsend
The companies that will benefit most from this tipping point will sell or finance both solar and storage products. Enphase Energy (NASDAQ: ENPH), Sunnova (NYSE: NOVA) and SunRun (NASDAQ: RUN) tops that list.
Enphase is very active in California. The company launched its new storage product, Encharge, in the summer In its earnings call for Q2 2020, the company said it expects an attachment rate between 8% and 10% of their inverter sales in the fourth quarter of 2020, almost twice as much as originally forecast.
Some quick calculations based on the retail cost of Enphase's storage and microinverters suggests that every MWh of batteries the company sells generates roughly twice as much revenue as each MW microinverter. If these numbers hold up, an 8% retention rate could add up to 30% to his inverter-only revenue. And the company expects a gross margin of around 35%. As installation rates continue to rise, Enphase could see a real slump in storage over the next few years.
Both Sunnova and SunRun use their financial ingenuity to provide homeowners with easy access to storage systems, and have a strong presence in California and other markets prone to climate-related power outages such as Puerto Rico. Both companies offer their customers storage solutions. Their businesses are valued in relation to the contracted monthly payments they expect for the energy systems they fund. The more expensive the systems, the higher the monthly payments – and storage systems are more expensive. Sunnova reported an attachment of almost 30% for its customers.
As California goes, so does the nation
Investors looking for ways to invest in solar energy companies to meet rising demand for energy storage should check out the financial results of companies in the space in the coming quarters. Ideally, companies where storage is a major new source of income Break off your memory sales from the rest of your business and this shows a significant surge in business for that segment. With climate-related blackouts becoming more prevalent in the United States, the trend towards energy storage in California is likely to spread to markets across the country.