The California Energy Commission recently passed a law requiring most California homes built after January 2020 to have solar panels. The new law is good news for solar stocks, and Height Capital Markets analyst Katie Bays said Monday that investors have multiple avenues to play the new California law.
“We believe California’s new solar mandate will benefit panel installers and manufacturers while increasing volatility in the state’s power market,” Bays said.
The law requires all homes less than four stories in height that do not have shaded rooftops to come equipped with solar systems capable of generating output roughly equal to the electricity usage of the home.
Before solar investors celebrate the news too much, Bays said the huge knee-jerk reactions in solar stocks such as Sunrun Inc RUN — which was initially up 16 percent following the news — could be misdirected. Manufacturers such as SunPower Corporation SPWR and First Solar, Inc. FSLR will be the biggest winners in the long term and could sell to homebuilders directly, the analyst said.
“As with the city of Lancaster, outside of Los Angeles, homebuilders like KB Home KBH who were required to add rooftop solar to new properties chose to contract directly with a manufacturer to supply solar panels for housing developments."
In addition to panel manufacturers, Bays said Tesla, Inc. TSLA will get a boost to its battery business in California.
In terms of potential negative market impact on electric companies, Bays said PG&E Corporation PCG is more insulated than Edison International EIX or Sempra Energy SRE due PG&E's territory including less new home construction.
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