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Australia's Solar Boom Draws Attention: 3 Stocks to Watch

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Australia has established itself as one of the forerunners in the global transition toward a green economy. Evidently, the country is deploying new renewables 10 times faster per capita than the global average and four times faster per capita than in Europe, China, Japan or the United States, as stated by the International Renewable Energy Agency (IRENA) in its latest Renew Economic analysis.

Interestingly, about 99% of new renewables in Australia are solar photovoltaic (PV) and wind. In particular, solar rooftop installations grew to record levels in the country. Naturally for solar companies across the globe, the Australian market offers a profitable investment abode.

Secret Behind Australia’s Solar Success

A combination of natural advantages and favorable policymaking has been driving the solar market boom. Notably, Australia receives an average of 58 million petajoule (PJ) of solar radiation per year, approximately 10 000 times larger than its total energy consumption. However, Australia's current use of solar energy is low with solar energy accounting for only about 0.1% of Australia's total primary energy consumption.

Therefore, there remains ample room for solar expansion in this nation, which is well reflected in the record solar installations. According to the Clean Energy Regulator’s (CER) latest Small-Scale Renewable Energy Scheme data, more than 2.46 million solar PV systems were installed in households, community centers, schools and small businesses in the second quarter of 2020. This has resulted in more than 86,000 new installations compared to the first quarter to reach a cumulative installed capacity of 11.4 gigawatts (GW).

Apart from the abundance of the natural solar energy, another key catalyst driving such solid installations in the country is the lack of strict regulations for installations, which in turn has kept the price considerably low. Evidently, residential solar systems are currently priced at about 70 cents per watt in Australia, including installation, which is quite lower than the equivalent price of $2.69 per watt in the United States.

Moreover, solar electricity generation is also increasing rapidly backed by government policies, notably the Renewable Energy Target. These include the government's Clean Energy Initiative Solar Flagships Program managed by the Department of Resources Energy and Tourism, which has committed $1.5 billion to support the construction and demonstration of up to four large-scale solar power plants in Australia, using solar thermal and PV technologies. Such investments also play a vital role in the growth trajectory of the Australian solar market.

Will the Solar Boom Continue?

The Clean Energy Regulator projects that Australia will deploy about 22 gigawatts of new solar and wind over 2018-21. According to the Australian Energy Market Operator’s (AEMO) July Generation Information data, there are currently 95 proposed solar projects with 23 committed and under construction. Considering such an ambitious planned pipeline and current installed capacity, no doubt Australia’s solar market growth is going to continue in the days ahead.

Stocks to Watch

Considering the aforementioned forecast, solar stocks across the globe have been either investing in or sealing deals with Australia-based solar players.

Below we have mentioned a few such companies, carrying a Zacks Rank #3 (Hold), which have already set foot in Australia’s market and are expected to benefit from the boom. Also, their impressive fundamentals make them desirable choices for investors' watchlist.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Enphase Energy (ENPH - Free Report) signed a supply deal in August 2020 for its IQ7+microinverters with Australia-based solar energy provider, Solargain. Per the terms of the deal, Enphase microinverters will be used as the premium inverter solution for Solargain’s turnkey retail solar offerings in Australia. In April, Enphase joined forces with Australian solar industry innovator 5B for supplying its IQ7+ microinverters. The company boasts a four-quarter average earnings surprise of 19.59%, while its current-year earnings estimate indicates year-over-year growth of 22.1%.

JinkoSolar (JKS - Free Report) in August 2019 announced the supply of its monocrystalline solar panels to its local arm Vena Energy, which is the largest renewable energy company in the Asia Pacific region. In June 2020, JinkoSolar announced that they have confirmed orders totaling more than 100MW with Australia’s wholesale distributor, Blue Sun Group. The company hasa long-term earnings growth rate of 20%, while its current-year earnings estimate indicates year-over-year growth of 8.6%.

Canadian Solar (CSIQ - Free Report) in August 2019 signed a contract for providing Operations & Maintenance (O&M) services to three local solar photovoltaic (PV) plants with an aim to minimize downtime and increase site availability. The company boasts a four-quarter average earnings surprise of 28.26%, while its current year earnings estimate indicates year- over-year growth of 18.7%.

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