Needham: California Metering Decision A 'Win' For Residential Solar

• Solar stocks rose significantly on January 28.
• Needham’s Y. Edwin Mok said that the approval of California NEM 2.0 represents a win for residential solar companies.

The California Public Utilities Commission [CPUC] voted in favor of the proposal to maintain the net energy metering [NEM] program in California. Analyst Edwin Mok mentioned that the overall implication of this news is positive for solar. He enumerated the reasons as:

1. It removes negative policy overhang in California, which is the largest US residential solar state, especially in light of Nevada's recent discontinuation of net metering
2. The added costs for solar customers is small and immaterial
3. It expands the market by increasing scope to system larger than 1MW, albeit with some restrictions
4. Switching to time-of-use [TOU] rates would minimize the impact on the grid.

Although solar stocks have surged on the news, there is more upside for the group, Mok believes. He added that this policy decision supports robust demand for California residential solar, which would benefit:

• The leader – SolarCity Corp SCTY [Rated: Hold].
• MLPE suppliers - Solaredge Technologies Inc SEDG [Rated: Buy, PT: $34] and Enphase Energy Inc ENPH [Rated: Hold] – Both these companies offer technologies in metering and storage that might become more important in California going ahead.
• Developer - Sunedison Inc SUNE [Rated: Buy, PT: $7], assuming that the company completes the acquisition of Vivint Solar Inc VSLR.