Monday at the 26th Annual ROTH Conference saw some of the industry leaders for solar panel manufacturing sit down to discuss the future of their industry. It’s an exciting time to be a solar company at the moment, with a huge run in 2013 that left the Guggenheim Solar ETF (TAN) the top-performing non-leveraged ETF for the year. Of course, anyone working at a solar company probably also remembers the lean years that preceded the boom when valuations plunged in 2011 and then bottomed out in late 2012.
The panel at the ROTH Conference looked at an array of issues facing the solar industry, including the promise of energy storage technology, the rate of growing demand for their products, and even the ongoing trade war with China.
The panel was moderated by Philip Shen, a Senior Research Analyst ROTH Capital Partners, and introduced by Chris Forrester, a partner at Sherman & Sterling. Sitting on the panel was Rhone Resch, President & CEO of the Solar Energy Industry Association; Tony DiPaolo, the CFO of Real Goods Solar ($RGSE); Herman Zhao, the CFO of JA Solar Holdings (JASO) ; and Michael Potter, CFO of Canadian Solar (CSIQ) .
Growing Demand is Promising for Industry
As much as demand has increased in the last year and a half, industry experts continue to anticipate strong growth into the future. And the panelists were more than willing to discuss the sunny future for their industry.
“[It’s] very uncertain… [but] we expect to have a 10 gW market by 2016 in the [United States],” said Rhone Resch. “And depending on what happens with distributed generation, depending on what happens with state renewable portfolio standards, the ITC, and also the EPA’s 111d rules, we think that demand can continue to rise from there. So I think in 2019 in the United States, you’ll see the market somewhere around 15 gW on an annual basis. I think the US will remain in that 10-20 percent of the global market, so I think you’ll see a global market somewhere around 100 gW by 2019.”
Michael Potter, meanwhile, observed that even in the industry’s darkest days, it was still growing.
“A lot of people missed the fact that, a few years ago when things looked fairly dire for solar, the market was still growing,” he said. “Even in the worst years when the valuation of the solar companies was the lowest, there was still growth year-over-year in demand.”
Tony DiPaolo emphasized that the potential growth on the residential side was very strong in the near-term future.
“When we look at numbers for next year and the year after, we see 30 to 50 percent growth in volumes that would put next year somewhere above a gigawatt on the residential side, possible as high as 1.2 gW, and similar growth the year after,” he said.
But ultimately, it was clear that the record year in 2013 was generating excitement throughout the industry.
“We’ve been building out solar in the United States for 30 years, right? In the last 18 months, we’ve installed as much solar as we have in the previous 30 years,” said Resch.
Emerging Markets Could Sustain Growth
Also contained in the discussion of rising global demand was the consideration of just where that demand would be coming from. The potential for emerging markets to drive the construction of new solar capacity is clearly an exciting prospect for many in the industry.
“A few years ago, a very dramatic shift happened,” said Michael Potter. “It used to be purely policy driven. Without government policy offering incentives, there was no demand for solar… Very recently, the costs of solar … has become so affordable that in most places in the world it’s actually very competitive ... And it lots of places in the world, it’s actually much cheaper to build solar today. In emerging markets, where they need electricity quickly and they have a big concern about pollution, solar can be built quickly and it can come on line fast and it’s not polluting and it’s very cost effective. There’s no real need to make large incentives.”
“I think if you want to look for what’s the next big market…the Middle East and South America would be the two that I would name off the top of my head,” he continued. “There’s a lot of countries in the Middle East that burn oil to generate electricity. Obviously, using solar would be a much better way of generating electricity. They can either save the oil for longer or sell it and get more money for it. And South America, again, it’s an area where there’s not a lot of direct government incentive to pay people for putting solar in but where the cost of solar is very grid competitive. And there’s a lot of industries that need electricity and need the flexibility that distributed generation can bring. So I think that those regions could be quite good markets for solar going forward.”
New Technologies Could be Game-Changing
The current focus for these companies is clearly in using their current technologies to grow into new markets, but that didn’t mean that the anticipation of new products isn’t wasn’t on their radar. Most notably, excitement surrounded the potential contained in energy storage technology. While still not on the market, batteries that could efficiently store energy collected while the sun’s up so it can be distributed at night, during peak usage, were viewed as potential game-changers.
“I think the real thing is, you have to understand we’re also a technology driven sector,” said Potter. “And one of the areas where there’s a big chance for a breakthrough is in energy storage. If there’s a good breakthrough and you can actually store the energy that’s generated during the day and use it at night? I think 10 percent a year is nothing compared to where it could grow and you could see a big move towards not just distributed generation solar, but large arrays of solar storing energy overnight.”
An Industry, not an Issue
One theme that also ran through the panel was solar’s growing independence from policy-driven demand. The desire to operate outside of political debate was clear, and these executives seemed confident that the industry was heading for a place where it could continue healthy growth without relying on government policies.
“There’s lots of countries in the world that have ‘conservative’ governments that are pro-solar,” said Potter. “I don’t think it’s really a Democrat vs. Republican issue. If it’s not heavily government-subsidized and it’s a beneficial industry and a beneficial technology to use, a lot of the partisan discussion goes away. … I see a lot of Republicans suddenly realizing that this is an individual empowering technology, where you can disconnect yourself from the grid and where you’re not beholden to the government and you can still power electricity in your house. And it’s a very different way of looking at it. If it’s a money-burning, eventually job-destroying type of effort that’s just government subsidy driven? That’s going to get a political discussion around it. If it’s a technology to generate electricity that’s competitive with and environmentally friendly compared to other forms of electricity generation? Then it’s just a dollars and cents kind of things.”
Rhone Resch echoed this sentiment.
“What we work really hard [for] as an industry is to make sure that we are not defined as an ‘issue,’” he said. “So when Obama talks about environment as an issue or talks about solar as an issue, we want to redefine solar as an industry. … There’s a lot of really positive stories that are occurring in Republican districts, Republican states. We get support from Republican senators as well as Governors. And so what we’re trying to do is position ourselves so that we do have broad-based bipartisan support.”
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