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3 Stocks to Gain From Expanding Southeast Asian Solar Market

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The Southeast Asian region is set to become one of the fastest-growing solar energy markets in the world due to the rising demand for electricity and prolific solar resources. Electricity consumption in this region is expected to double by 2040, per the International Energy Agency (IEA), leaving ample scope for the solar energy market.

Notably, over the past few years, the solar energy market in nations such as Thailand, Vietnam, Philippines, Brunei, Singapore and Malaysia has been steadily growing, where a handful of solar projects have come online.

South-East Asian Nations in the Spotlight

As stated in a report by Wood Mackenzie, Vietnam currently leads Southeast Asia’s solar photovoltaic (PV) market with the largest installed capacity in the region. In 2019, Vietnam's cumulative solar capacity increased more than five times, which led the nation to emerge as one of the top 10 solar countries in the world.

Among the other nations in Southeast Asia, Malaysia and Singapore are showing stark indications of solar market growth. For instance, Malaysia has set a target of increasing its renewable energy in electricity generation from 6%, currently, to 20% by 2025, and the majority of this would be driven by solar (as reported by Reuters). Singapore has targeted at least 2 gigawatt (GW) peak of solar power capacity by 2030, or more than 10% of current peak electricity demand, replacing natural gas which generates 95% of the country’s power now.

Key Catalysts Driving South-East Asian Solar Market

Solar energy usage has been increasingly becoming popular in the region due to the significant rise in electricity demand, declining costs for solar panel installations, falling technology costs and favorable policies related to the increasing adoption of solar energy. The increasing cost-competitiveness of renewable energy sources, including solar, continues to provide a substantial boost to installations.

Considering the growth prospects of the solar market in this region, abundant investments are also pouring in. Interestingly, a new climate fund backed by philanthropic donors is aiming to trigger $2.5 billion of clean energy investment in Southeast Asia, of which surely a major portion will be spent on solar expansion. No doubt these growth drivers are expected to significantly boost the Southeast Asian solar market in the coming days.

What Lies Ahead?

Per a Wood Mackenzie report, Southeast Asia’s cumulative solar PV capacity is expected to reach 12.6 GW by the end of 2020, which is further forecast to grow to 35.8 GW by 2024.

Large-scale solar projects will have a strong hold on the installation capacity for the next five years. Further, as project economics start to become more attractive, distributed solar installations will also pick up.

Stocks in Focus

Let’s take a brief look at a few energy companies that are expanding their footprint in the South-East Asian solar market. Considering the market’s growth prospects, these stocks are poised to benefit significantly.

Enphase Energy ENPH, in November 2020, signed a distribution partnership agreement with the Philippines’ solar energy provider, MSpectrum, to distribute IQ 7 family of microinverters to its residential and commercial installers across the nation, starting first-quarter 2021. The company carries a Zacks #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Canadian Solar (CSIQ - Free Report) , in August 2020, commenced the construction of a 5-MWp commercial and industrial (C&I) rooftop solar project in Malaysia in collaboration with Antah Solar and Eleaps. Once it begins to operate, the plant is expected to generate approximately 6,700 MWh of solar electricity each year for 25 years. The company currently holds a Zacks Rank #2 (Buy).

TOTAL S.A. (TOT - Free Report) , in March 2020, signed a binding contract to provide 25 megawatt-peak (MWp) of solar rooftops for 24 facilities of one of the largest food companies in Thailand. In December 2019, the company completed three solar rooftops with a combined capacity of 1.1MW for Jentec Storage in the Philippines. The company carries a Zacks #3.

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