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FERC Rejects Fuel Subsidy Plans: 3 Solar Stocks in Focus


The Federal Energy Regulatory Commission (“FERC”) recently rejected the request from the Department of Energy to assist the old and financially challenged coal and nuclear power-based plants. The request was to provide 90 days fuel supply on site to coal and nuclear power plants, for increasing the reliability and resilience of the nation’s grid.

However, the Federal regulators have rejected the subsidy plan and have provided their opinion relating to resilience of the grid. Per the regulators, continuation of uncompetitive coal and nuclear units will not support the grid. Threat to grid resilience comes primarily from the disruption of the transmission and distribution lines.

President Trump acted on his pre-election promises and has taken steps toward repealing the Clean Power Plan. He believes that such plans will make U.S. manufacturing non-competitive in the global markets. This has helped in running the coal fired electricity generation units for a longer period than previously expected but this new development will definitely hurt the prospects of the units.

Even with the pro-coal plans, the renewable energy and natural gas-based power plants have made continuous inroads in the generation mix in the United States. Per a recent release by the U.S. Energy Information Administration (“EIA”), nearly half of the 25 gigawatt (GW) utility-scale electric generating capacity added to the grid in 2017 came from renewable sources.

So, it is quite evident that alternate energy sources have gained popularity among the utility operators as these hardly create any emission. Also, the costs of operating and setting up alternate energy power plants are dropping each day due to use of new technology. The costs for setting up alternate units are expected to go down further.

The Zacks Solar industry has gained 48.7% last year, outperforming 21.3% return from the S&P 500.

Solar Stocks in Focus

Alternate energy companies, like solar energy, have been strengthening their place in the total generation mix of the United States even with pro-coal moves from the new administration. Per the EIA release, the renewable sources contributed nearly 17% of the total electricity generated in the United States in 2017.

The current development will be a tailwind and definitely boost the prospects of the solar energy-based electricity generation units.

Per EIA, solar energy-based production will keep rising in the United States. EIA estimates that U.S. large-scale solar capacity totaled 27 GW at the end of 2017 and is expected to increase to 30 GW and 42 GW at the end 2018 and 2019, respectively.

Let us focus on three solar stocks that have significantly outperformed the solar industry in a year and are well poised to provide strong return to investors going forward.

SolarEdge Technologies Inc. SEDG currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company, along with its subsidiaries, provides solar energy solution to its customers in the United States and around the globe. In a year, the company has returned 171.1%, outperforming 48.7% gain of the industry.

The long-term earnings growth projection (three to five years) is 24%. The company delivered an average positive earnings surprise of 24% in the last four quarters. Its 2018 Zacks Consensus Estimate has moved up 16.1% to $2.23 in the last 90 days.

First Solar, Inc. FSLR a Zacks Rank #2 (Buy) stock, designs, manufactures and sells solar electric power modules using a proprietary thin-film semiconductor technology. In a year, the company has returned 99.7%, outperforming 48.7% gain of the industry.

The company delivered an average positive earnings surprise of 537.4% in the last four quarters. Its 2018 Zacks Consensus Estimate has moved up 4.2% to $1.49 in the last 90 days.

Enphase Energy, Inc., ENPH a Zacks Rank #3 stock, along with its subsidiaries, designs, develops and sells microinverter systems for its international and U.S.-based customers. In a year, the company has returned 66.2%, outperforming 48.7% gain of the industry

The company delivered an average positive earnings surprise of 5.4% in the last four quarters. Its 2018 Zacks Consensus Estimate has moved up to 4 cents from a loss of 6 cents in the last 90 days.

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