Solar stocks could see a boost as more companies follow Apple
Apple’s (AAPL) agreement this month to buy $850 million worth of solar-generated electricity over the next 25 years marks the start of a sea change in the way big corporations are going green. Already the news has been followed by similar deals from Google (GOOGL) and healthcare provider Kaiser Permanente, with many more expected.
Corporate America has been dabbling in solar for years, but most of the action has been in much smaller installations of solar panels on the roofs of Walmarts (WMT) and Costcos (COST). So-called power purchase agreements like Apple’s could be much more significant as they allow developers like First Solar (FSLR) to raise funds to build more massive installations.
First Solar’s stock price, which has jumped 7% since the Apple deal, took another leap on Tuesday, up 14%, after the company announced plans to shift some of its solar power plants into a joint venture with SunPower (SPWR). The Guggenheim Solar ETF (TAN), which includes both stocks, was up 4% on Tuesday after gaining 2% since the Apple deal.
Apple’s deal, for 130-megawatts – enough to power 60,000 homes – is by far the largest commercial arrangement of its kind. The company says the electricity it agreed to buy will be enough to power its new spaceship-shaped Cupertino, Calif., headquarters and all its other stores and offices in California. Apple has previously entered three smaller power deals for data centers in Arizona, Nevada and North Carolina.
Get the Latest Market Data and News with the Yahoo Finance App
In fact, Apple has signed four of the 10 largest solar power purchase agreements, according to Greentech Media, which tracks the industry. But there’s plenty of room for growth. All four of Apple’s deals total less than 8/100s of 1% of total U.S. electricity generation.
Apple CEO Tim Cook said his company is making the move to reduce the impact of global warming. "We know at Apple that climate change is real. Our view is that the time for talk is past, and the time for action is now," Cook said as he disclosed the deal with First Solar at a Goldman Sachs investor conference on Feb. 10.
Kaiser Permanente, which operates 38 hospitals, said it agreed to buy 110 megawatts of power for 20 years from a new solar project being built in southern California by NextEra Energy (NEE). The plant could ultimately supply 485 megawatts, but NextEra couldn’t start construction without the Kaiser agreement guaranteeing a steady cash flow.
Kaiser, along with Google, also entered into a purchase agreement to each buy 43 megawatts of power generated by a NextEra wind farm near Livermore, Calif.
It’s not just a matter of protecting the climate, however. Solar- and wind-generated electricity has gotten much cheaper as well. In some states, such as California, solar-generated electricity costs are already competitive with prices from traditional utilities.
“The economics of solar and wind are getting better and better every day, and already rival those for building new gas-fired power plants,” says Robert Howarth, a professor at Cornell University and co-author of a study on converting New York State to renewable energy sources. New commercial deals like Apple’s are “yet one more sign that the transition to a fossil-fuel-free economy is solidly underway.”
Companies are also motivated to move this year because a key tax credit is scheduled to expire at the end of 2016, notes Jesse Grossman, CEO of solar energy provider Soltage. He sees “a larger emerging trend of intelligent corporations moving now to lock in the benefits of solar energy” before the solar investment tax credit expires.
