A Solar Win in California, Sort Of (STP, FSLR, SPWRA, PCG, EIX, SRE)

The solar sector appears to be lightly benefiting from California legislation efforts that would secure above market rates as a feed-in tariff for small solar power generators.  California already has mandates calling for larger utilities to generate more power from alternative energy sources (as much as one-third by 2020).  The state already offers relatively high utility rates and solar subsidies and this will take what already one of the top solar markets to somewhat of a German model.

There is a larger effort at the California Public Utilities Commission, or CPUC, that may benefit larger players like Suntech Power Holdings Co. Ltd. (NYSE: STP), First Solar, Inc. (NASDAQ: FSLR), and SunPower Corp. (NASDAQ: SPWRA).  The discrepancy comes in over which companies will or will not benefit from the move if a smaller benefit comes into play or if it is the larger benefit.

Legislation over the weekend would require that California utilities have to purchase electricity from smaller or independent solar-panel generators which generate up to 3 megawatts at set rates.  The new rates will actually be above what the utilities would pay for wholesale power from conventional sources.  The buy-in prices will be demanded until a total-state goal of 750 megawatts is hit.  After reading about the proposed rates, some feel this is not enough to generate significant solar investment while some feel the investments are worth merit.

In the larger CPUC effort, the CPUC staff has proposed that California’s top 3 power generators collectively buy up to 1,000MW (or more) from even larger generators than this new move calls for.  This would require that PG&E Corp. (NYSE: PCG), Edison International (NYSE: EIX) and Sempra Energy (NYSE: SRE) would have to buy 1 Gigawatt of power over a four year period in reverse auctions, although that may change.  The California Solar Initiative offers solar incentives to energy users in investor-owned utility territories in California with a goal to install 1,940 MW of new solar by 2017.

This greater move is not expected to reach a decision any time soon, so the news from this weekend may have to be good enough for now. It seems that watching the oil price ticker may still offer more insight into the solar panel market demand rather than hoping what a giant state that has been near financial collapse passes or proposes.

We are seeing a positive result so far this morning after the market opened in some of the larger solar stocks, on what appears in part to be from a $2.00 rise in oil to $73.76 per barrel.  SunPower Corporation (NASDAQ: SPWRA) is up 2% at $32.15.  First Solar, Inc. (NASDAQ: FSLR), which was downgraded by Pacific Crest to ‘Sector Perform’ is up almost 1% at $158.15.  Suntech Power Holdings Co. Ltd. (NYSE: STP) is up over 2% at $15.91.

JON C. OGG