Deutsche Bank predicts growing solar margins in 2015, despite oil price


Deutsche Bank analysis has tended to be bullish on solar and its 2015 solar outlook, delivered today, did not stray from this song sheet. In a key message for investors, Deutsche said that reductions of oil prices would have little to no material impact on solar demand.

“We expect a balanced supply demand outlook as strong demand from the U.S. and improving demand from China/other emerging solar markets offsets any potential demand weakness in the UK/Japan,” writes Deutsche Bank solar analyst Vishal Shah. Shah noted that solar's share of the electricity generation mix continues to grow.

The U.S. market was identified by Deutsche as representing a bright spot, with the growing rooftop market described as being “the key highlight.” Deutsche noted positively, “utilities will also start competing in the [downstream] solar market [in 2015].”

Financial innovation, in the form of yieldcos, was highlighted by Deutsche as an important theme, with the analysis concluding that the firms that have already built experience in yieldcos have first mover advantage. The investment house expects companies to begin launching yieldcos of international solar assets in 2015.

Deutsche Bank’s Shah identified SunEdison, SolarCity, Vivint Solar and SunPower as being particularly attractive stocks. The inclusion of Vivint comes at a time when predatory shareholder class action lawsuits continue to swirl around the solar lease provider.

While falling oil prices have lead to a weakening in solar stocks in recent weeks, Deutsche noted that this presented investors with, “an attractive entry point for investors.”

The full analysis presented detailed figures as to why oil prices should have little to no correlation to solar stocks.

“Oil represents only about 5% of global electricity production and in some of the important solar markets such as the U.S. and China, oil based electricity generation is less than 5% of the total,” the Deutsche Bank analysis noted. “Moreover, the fuel cost of oil based electricity generation even at US$50 oil prices is in the 7-9c/kWh range and as shown in the note, the marginal electricity cost is higher than solar in many regions worldwide.”

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