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1、Equity Research Americas | United StatesAlternative Energy OutlookInto 2020, Charged Up for Battery StorageAlternative Energy | Annual Flavors for the new year storage and offshore wind: Battery storage demand continues to grow at both utility scale and smaller residential systems as a result of a g

2、rowing commoditization of batteries and clean energy policies that increasingly oppose natural gas, requiring batteries to balance intermittent renewables for reliable power.Attachment rates at utility scale and commercial renewable projects are already high due to ability to participate in capacity

3、 markets and get paid for shaving peak demand. Residential demand has been far weaker (at higher prices) but is now building rapidly for solar rooftops due to requirements for backup power in blackouts regions (California) and state policies such as Time of Use rates (California) and incentives (Mas

4、s). Offshore wind deployment in the US has so far lagged other countries, but the US is expected to install 26 GW in the next few years due to favorable state policy support in the Northeast. Still prefer residential solar, in an underpenetrated market which competes with inflationary utility retail

5、 electric rates and benefits from faster battery storage adoption. Solar module manufacturers are at risk of being oversupplied in late-2020 with the cycle highly dependent on China solar subsidies (still 30% of global demand). Smart inverter manufacturers strengthen their duopoly in residential sol

6、ar, but future battery storage adoption is already reflected in their stock prices. Onshore utility-scale solar and wind struggle with competitive returns, but we see opportunity for those with favorable cost of capital, land/transmission access, or inventory with higher tax credit. Offshore wind of

7、fers high returns in growth years, but with limited pure-plays in the US. Stocks: We like residential solar market leader Sunrun (RUN OP) as management addresses self-inflicted labor shortage in 1H20, benefits from growth in underpenetrated market, with growing cash generation, favorable rate enviro

8、nment, and positively placed to take advantage of any tax credit extensions. We also prefer Sunnova (NOVA - OP), with fastest residential deployment and revenue growth, albeit off a smaller base than peers. We like NextEra Energy and NextEra Energy Partners (NEE, NEP OP each) as best in class renewa

9、ble developer and YieldCo in the US, and Azure Power (AZRE - OP) that benefits from India solar strategy and EBITDA growth visibility. We are not big fans of solar cell and module manufacturing amid supply glut but we like SunPower (SPWR-OP) due to their focus on growing US residential and commercia

10、l solar business. Smart inverter companies (ENPH, SEDG N each) near term solar and storage adoption is priced in.We are Neutral on First Solar (FSLR) as Series-6 cost benefits are priced-in, JinkoSolar (JKS) given supply glut challenges. Bloom Energy (BE) has an attractive technology but requires pr

11、oving out cost improvements Surprise factors: US Solar and wind tax credit extension positive for residential and utility scale solar developers, Storage tax credits unlock retrofit opportunity for solar and wind installations, China subsidy expansion (or removal) for utility scale projects is posit

12、ive (or negative) for solar manufacturers, and backlash against fossil fuels could accelerates renewable demand growth and multiple expansion. Potential M&A from regulated utilities seeking to benefit from the high growth of distributed renewables.Research AnalystsMichael Weinstein, ERP212 325 0897

13、HYPERLINK mailto:w.weinstein w.weinsteinMaheep Mandloi212 325 2345 HYPERLINK mailto:maheep.mandloi maheep.mandloiAndres Sheppard212 325 2306 HYPERLINK mailto:andres.sheppard andres.sheppardDISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS,LEGAL ENT

14、ITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could2020 Alt Energy DebatesPlease see our 2020 Utili

15、ties Outlook - Getting Meaner and Less Defensive for additional comments on US Electric UtilitiesEverything is better with storage residential solar positioned better (Page 5)Storage adoption in solar/renewable projects is faster than expected due to favorable economics and tax credits. Benefits all

16、 renewable companies, but more positive for residential solar with attractive battery upsell, grid services, and potential retrofit opportunity (RUN, NOVA, SPWR, VSLR, ENPH, SEDG).Possible tax credit extension but more likely under Democrats (Page 10)2019 saw increased push for decarbonization, expe

17、ct to see push for national RPS, and renewable tax credit extensions in 2020. Could accelerate renewable demand growth.A five year tax credit extension and/or exclusive battery storage tax credit also more positive for residential solar developers and smart inverter suppliers followed by utility sca

18、le developers and solar manufacturers.30% tax credit safe harbor in 2019 - (Page 15)Solar developers are safe harboring tax credit for two years, instead of four, due to potential tax credit extension. The deadline for safe harboring a 30% credit was Jan 1, 2020, but if 5% of the investment is commi

19、tted before that date, physical delivery of equipment may be delayed until mid-March 2020 (alternatively, construction musthave begun in 2019). The project must be completed by Jan 1, 2024.State policies supportive renewable standards and net metering (Page 17)Expect more states to augment renewable

20、 mandates with clean energy standards. Dont expect any punitive measures against rooftop solar net metering policy given precedence in other states and popular support for renewables. 2020 changes on mind CA NEM 3.0, NY retail net metering rates, NJ SREC replacement.California state mandate (solar o

21、n new houses) favors solar leasing companies (RUN, SPWR, NOVA, VSLR) Page 20US trade cases Section 201/301/AD-CVD uncertainty ahead (Page 19)Section 201 mid-term review due in January 2020 - no changes expected for exempted technologies (FSLR, SPWR). Irrespective of any bifacial module exemption, US

22、 price premium driven by uncertainty over other trade cases (301, AD/CVD). Broader US-China resolution and Section 301 and AD/CVD resolution negative for Asian crystalline-silicon manufacturers (JKS).Solar module manufacturing Mono wafer oversupply depends on China demand (Page 22)Demand We forecast

23、 secular global growth 12.5% CAGR 2019-2022 due to falling module prices, competitive LCOE, and non-China growth. China demand uncertainty is important (still 30% of demand),Supply Growing mono wafer capacity at risk of oversupply by YE20Winners: Technology agnostic developers RUN, NOVA, NEE, AZRENe

24、utral: FSLR (firm bookings in the US), JKS (mono-PERC scale drives lower cost)Offshore wind Northeast growth waiting for federal approval (Page 26)Still expensive vs onshore wind/solar, but strong demand in Northeast due to state mandates (26GW). Await BOEM study in early 2020, positive for utility

25、partners bidding with European offshore developers (ES, D, PEG, AGR)Opportunity for utilities in distributed renewables - (Page 34)We believe utilities could emerge as suitors for unregulated rooftop solar. DG solar benefits from lower cost of capital, utilities benefit from customer growth.Other de

26、bates Carbon tax, rising rates, utility renewable ownershipCarbon tax/LCOE (Page 28) Solar, wind and natural gas are still the cheapest sources of electricity vs other new builds. We estimate potential carbon tax of $13- 30/MT puts solar at parity with operating coal power plants, though unlikely to

27、 muster support at federal level.Rising rates (Page 30) - Every 100 bps increase in cost of capital increases average LCOE by 8% or $2/MWh for utility scale solar projects, and by 9% of $7/MWh for residential solar projects.Utility solar ownership on rise (Page 32) - Replacing gas with solar and sto

28、rage is becoming a financially viable proposition for utilities. Ratebasing adds to the cost for now though due to unfavorable treatment of tax credits at regulated entities vs third- party developers serving through power purchase contracts.The Surprise FactorChina demand surprise: Higher than expe

29、cted demand targets implies higher gross margin for manufacturers. Winners : Polysilicon manufacturers, China based module manufacturersUS withdraws Section 201 tariffs: Winners: US solar developers, Asian manufacturers, Losers : Solar developers already exempt from tariffs (FSLR, SPWR, TSLA)US with

30、draws all import tariffs (including Section 301 and AD/CVD): Winners: US solar developers, Losers: Solar manufactures (FSLR, SPWR, JKS, CSIQ, etc.)Figure 1: Renewables 2020 Catalyst CalendarCompanyTickerDescriptionTimingCommentsRenewablesGlobal SolarChina solar subsidy announcementResidential SolarS

31、an Diego Gas & Electric Company Electric Rate UpdateRaising Minimum Electric BillResidential SolarCA NEM 3.0 discussions2020NEM 3.0 initial petitionsResidential SolarNJ TREC final priceEarly 2020NJ BPU to determin final REC priceFSLR/SPWRSection 201 mid-term review1/13/2020Report to commissionFSLR/S

32、PWRSection 201 mid-term review2/7/2020Final tariff annoucementUtility solarFERC PURPA Review2020Expected to reduce price/durationSource: Credit SuisseRecent Sector Notes:Utilities and Alternative Energy: 2020 Utilities Outlook - Getting Meaner and Less Defensive (12/16)Alternative Energy: CS Tech Co

33、nf Takeaways - Solar Ecosystems Emerging (12/6) Alternative Energy: The Brighter Side of Bifacial Cells (12/6)Alternative Energy: Alt Energy Question Bank - 2019 CS Tech Conference, Scottsdale AZ (12/2)Alternative Energy: A Two-Faced Flip Flop; Await Dec 5 Decisions (11/22) Utilities and Alternative

34、 Energy: Plenty of Gravy in the GREEN Wish List (11/19) Alternative Energy: Key Questions for 3Q Earnings Season (10/29)Utilities & Alternative Energy: Reading the Wind (10/14)Utilities & Alternative Energy: China Coal Pricing has Limited Impact on 2020 Solar Demand (9/30)Alternative Energy: Q2 Prev

35、iew: Higher Expectations, Stronger Demand (7/29) Alternative Energy: Wind on Tax Extenders Menu (6/19)Alternative Energy: Solar: Two Face Flips Exemption (6/17) Alternative Energy: 25% Mexican Tariffs Priced-in (6/3)Alternative Energy: 1Q19 Renewables & Alt Energy Earnings Preview (4/29) Utilities &

36、 Alternative Energy: California Bankruptcy Update:Transcript of Call (4/26) Utilities and Alternative Energy: California Alt Energy Bus Tour Initial Takes (4/1)Utilities and Alternative Energy: California Distributed Generation Bus Tour Question Bank (3/27)Utilities and Alternative Energy: PG&E Bank

37、ruptcy Filing: Additional Thoughts (1/29) Utilities and Alternative Energy: Seeking Clarity for California Renewables (1/13)Utilities & Alternative Energy: Conference call with Frank Lindh, CA Energy and Utilities Lawyer (1/11)Recent Weeklies:Utilities & Renewable Roundup: Things We Learned This Wee

38、k (12/20) Utilities & Renewable Roundup: Things We Learned This Week (12/9) Utilities & Renewable Roundup: Things We Learned This Week (11/27) Utilities & Renewable Roundup: Things We Learned This Week (11/25) Utilities & Renewable Roundup: Things We Learned This Week (11/18) Utilities & Renewable R

39、oundup: Things We Learned This Week (11/4) Utilities & Renewable Roundup: Things We Learned This Week (10/28) Utilities & Renewable Roundup: Things We Learned This Week (10/21) Utilities & Renewable Roundup: Things We Learned This Week (10/11) Utilities & Renewable Roundup: Things We Learned This We

40、ek (10/7)Everything is better with Storage Growing battery adoption: US battery storage annual MW deployments are expected to grow at 66% CAGR from 0.4GW in 2019 to 5.4 GW 2024 (per Wood Mackenzie), which we estimate implies a storage market size of $0.6B in 2019, growing to $5B in annual sales by 2

41、024. Note that this doesnt include additional value from grid services enabled by batteries. The growth driven by residential storage installation (from 150 MW in 2019 to 1.1GW by 2024), non-residential behind the meter installations (120 MW in 2019 to 600 MW in 2024), and utility scale installation

42、s (160 MW in 2019 to 3.7 GW in 2024). In the near term, residential battery installations grow 3X in 2020, and utility scale 5X. The strong demand is driven by faster than expected decline in battery costs, improving economics, storing intermittent renewable energy, storage specific RFPs to replace

43、gas peakers/transmission, ability to shave off peak demand charges, and a growing need for reliable power behind the meter especially during blackouts. We also see additional support for batteries from the green quarters who see it as a replacement for natural gas in a 100% clean energy world. Stock

44、 picks: Key beneficiaries of utility scale storage in our coverage include large scale developers NEP/NEE. Residential storage market is nascent with ample room for growth for all stakeholders. Positive for RUN, NOVA, SPWR, SEDG, and ENPH.Figure 2: US Storage Deployment Growing at 66% CAGRFigure 3:

45、Storage Revenues $5B/yr Potential (Excludes grid services opportunity)6.0US Storage Deploy ments, GW5.04.0$6.0US Storage Market Sales , $B$5.0$4.0$3.8$3.9$1.6$0.2$0.3$0.5 $4.7$4.7 3.02.01.00.0201720182019E2020E2021E2022E2023E2024E$3.0$2.0$1.0$0.05.45.13.93.61.50.20.30.4201720182019E 2020E 2021E 2022

46、E 2023E 2024EResidentialNon-ResidentialUtility ScaleResidentialNon-ResidentialUtility ScaleSource: Wood MackenzieSource: Wood Mackenzie, Credit Suisse estimatesNear-term storage driven by reliability, ITC, economicsReliability needs growing: Residential storage attachment rates are expected to grow

47、from 5% of installations in 2018 to 7% in 2019 and 16% in 2020, and potentially growing to 30% of new installations by mid-2020s (we assume average battery size of 6 kW per customer). The growth driven by favorable economics in five states today, increasing to 23 states by 2020s, and due to need for

48、 reliability amid power blackouts caused by proactive de-energization in California or weather related events elsewhere (hurricanes, wildfires, etc.). A traditional residential solar system is “grid-tied” and switches off when the grid turns off, hence requiring a battery to consume daytime surplus

49、solar.Still dependent on solar for tax credits: While storage systems themselves receive no federal tax credit directly, storage attached to solar in the US essentially piggyback onto solars 30% investment tax credit that incentivizes additional capex. A wind production taxcredit available on energy

50、 generated by the turbine doesnt incentivize any additional capex. Industry trade associations and Democrats are pushing for a storage only tax credit which could potentially expand storage demand beyond solar. While storage didnt receive tax credits in the 2019 year-end spenders bill or tax extende

51、rs bill, could be accomplished in a new bill in 2020, perhaps even after the Presidential election.Near-term monetization driver load shifting for coincident peaks: One of the biggest drivers of large-scale battery storage deployments in the near term would be totime-shift mid-day peak solar supply

52、to better match evening peak load demand. Utility scale solar+storage systems have bid RFPs in the US at $30-$35/MWh for 2020/2021 deliveries, which are cheaper than new evening gas peaker power plants that have an LCOE of $40/MWh. Longer term, we expect storage grid services could be monetized as s

53、tate electricity regulators create new markets for frequency regulation, demand response, VAR, etc. The grid services market has an annual TAM of at least $5B+ in 2020, assuming$2K/customer of grid service monetization in line with Sunruns solar+storage win in New England ISOs forward capacity marke

54、t. We see additional value for owners of customer relations to upsell other grid services and collaborate with other home service providers.Storage equipment costs are declining faster than expected: Industry checks show solar battery costs are falling faster than anyones expectations due to new pro

55、duction capacity (mostly in Asia) for EV applications. We forecast battery pack cost of $156/kWh in 2019 for large orders declines to $100/kWh by mid-2020s and 80%, an MIT study casts doubt on ability to rely on lithium batteries to meet ultra-high renewable goals. A July 2018 MIT Technology Review

56、paper notes that high renewable penetration rates, especially 80% and above, may be impossibly expensive to engineer given the need for “bank upon bank” of expensive LiOn battery storage that will be required to provide power off-season; e.g., during winter. The paper suggests that “coupling battery

57、 storage with renewable plants is a weak substitute for large, flexible coal or natural gas CCGTs”, even assuming a 2/3 decline in battery cost from today. It cites a Clean Air Task Force estimate that at higher penetration rates, so many batteries must be added to mimic all-season baseload that sys

58、tem costs start to match battery costs, with 50% renewables in California at $49/MWh, but increasing to$1,612/MWh at 100%. They go on to note that reaching 80% in California would require 9.6M MWhs of battery storage and 100% would require 36.3M MWhs vs only 150k MWhs of storage in the state current

59、ly (mostly pumped hydro). Alternative storage technologies are in their infancy at this stage and not available in the bulk quantities needed at all. Another alternative to storage would be a massive increase in long-distance high-speed transmission to accomplish nationwide renewable balancing, but

60、this is also likely prohibitively expensive vs the more conventional alternative of relying on a mix of different fuels and motives to accomplish reliable electric service.Residential Storage Rise of the PlatformsNew business models emerging: Residential solar companies are evolving into ecosystems