A lot can change in a decade. For example, ten years ago, it cost between $ 140 to $ 150 per megawatt-hour (MWh) for solar energy, and this with the benefit of investment tax credits. However, in 2020, that cost dropped to $ 25 to $ 35 per MWh, making solar energy cheaper than fossil fuels. This downward trend in solar energy costs is expected to continue for the next decade, as it is on track to be the lowest-cost form of mass energy, even after adding battery storage.
Increases in solar power capacity are also expected to accelerate in the coming years. The industry expects to install an average of 10 gigawatts (GW) of new capacity per year until 2022, which is expected to increase to an average of 18 to 20 GW annually in the period 2023 to 2030.
It looks like it will be a golden decade for solar energy. Three actions that should benefit from this megatrend are Brookfield Renewable (NYSE: BEP) (NYSE: BEPC), First Solar (NASDAQ: FSLR), and NextEra Energy (NYSE: SEN). These are great stocks to buy and hold until at least 2030.
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A solar-powered growth plan
Brookfield Renewable is currently one of the global leaders in hydropower. However, she sees the brighter future of solar energy thanks to the dramatic decline in costs, which has significantly improved the savings from developing new solar projects. Brookfield wrote in a recent letter to shareholders: “We believe that it is possible that in ten years time most of Brookfield Renewable’s production capacity will be solar. It is not that we do not believe in wind or hydroelectric power, but in growth in solar energy. and the ability to develop and achieve strong risk-adjusted returns should allow us to grow our solar operations at a much faster rate. ”
The company has spent much of the past few years expanding its solar energy platform. It bought the rest of TerraForm Power that it did not own, acquired a 50% stake in the developer of solar energy projects X-Elio, bought several solar energy development projects in Brazil and, more recently, agreed to purchase Exelonsolar power business. As a result, Brookfield now has a pipeline of more than 10 GW of solar energy projects under development. To put this in perspective, Brookfield’s current renewable energy portfolio in operation is 19.4 GW. These solar energy development projects are an important source of energy, boosting the company’s forecast that it can increase its cash flow at a double-digit annual rate by at least 2025.
A bright future is ahead
First Solar is a leading developer of thin-film solar panels, ideal for utility-scale projects. The company currently has a portfolio of contracts totaling 12.2 GW of system sales and 8.3 GW of additional intermediate to late stage opportunities in the pipeline. For one thing, the company’s current production capacity is 5.5 GW, which means it has years of future sales in line.
Meanwhile, First Solar has one of the best balance sheets in the industry, boasting a net cash position of $ 1.4 billion at the end of the third quarter. It has unparalleled financial flexibility to continue expanding its manufacturing capacity to meet growing demand, while investing in the development of even better panels. This should allow it to stay one step ahead of its rivals and gain a significant share of the solar panel market in the next decade.
This renewable energy giant is only going to get bigger
NextEra Energy is already a global leader in the production of wind and solar energy. However, it currently has 15 GW of renewable projects in its portfolio, which is larger than its existing portfolio. A significant part of these new additions are solar energy projects due to the falling costs of panels and energy storage.
This extensive order backlog leads NextEra Energy to believe it can increase its earnings per year at an annual rate of 6% to 8% until at least 2023. In the meantime, given its experience and financial strength, it must be able to continue capturing opportunities to grow at an above-average rate over the next decade. This could give you the power to continue to outperform the market. This has been the case in the past decade, as NextEra generated a total return of more than 500%, more than double the S&P 500.
Well positioned for the solar energy mega trend
Solar energy is starting to shine. It is on its way to becoming the form of mass energy almost firm at the lowest cost, thanks to the dramatic drop in panel and battery storage costs. Industry-focused companies appear poised to grow at a rapid pace over the next decade, led by Brookfield Renewable, First Solar and NextEra Energy. This makes them excellent stocks to buy and hold until at least 2030.