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Solar Stocks in the US Up on Bright Prospects

More General Motors' solar power going online Fall 2014
More General Motors’ solar power going online Fall 2014

According to Deutsche Bank the falling cost of solar panels plus cheaper cost of finance is set to dramatically alter the US market. These trends will allow solar power to sell at the same price as all other power sources on the grid (that is achieve grid parity) in all 50 states of the USA by 2016.

This was the analysis of Vishal Shah, the leading solar industry analyst at Deutsche Bank.  He reviewed the second largest installer of solar power in the US, newly listed Vivint Solar (VSLR) which debuted last October 1. Vivint Solar started out as an extension business of a home security company, Vivint, Inc. Vivint Solar cashed in on a unique cross-sale opportunity by latching onto its sister company’s existing customer base.

Other analysts seem to share the sentiment.  Goldman Sachs agrees, saying that volumes will definitely grow in a market that not just huge, it also happens to be under-penetrated. Credit Suisse analysts, on the other hand, say that because solar power system costs fell 40% over the last three years, it has become more competitive with other energy sources.

Citi, however, is more cautious. They cite the risks such as reduced federal tax incentives by end-2016, as well as potential financing bottlenecks.

The optimism isn’t reserved only for Vivant Solar. Shares of SolarCity, JA Solar Holdings Co. and First Solar Inc. also rose last October 28, 2014.

Financing, a key element in power development, is one of the drivers of the trend. The Investment Tax Credit of 30% is one of the key factors. However, even if the ITC changes, Deutsche Bank estimates that financing costs will fall from the current 7 to 9 per cent to approximately 5.4 per cent next year. This will spur other financing models such as solar loans, retail bond offerings, asset backed securities and yield cos (publicly traded companies that own renewable energy assets).

It also helps that the technology for solar panel production is developing by leaps and bounds, pushing down installation costs even further.

So, with trends like these, I guess that we will see even more solar roofs coming up soon all across the nation.

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