Solar Power and Energy Storage Outlook Varies as Economics
Improve and Policies Shift

Morgan Stanley research analysts published a Blue Paper recently on the outlook for solar power and energy storage, providing investors with insights on major drivers for solar demand through 2020 and a model for evaluating the economics of solar projects globally.

The 14 contributing analysts expect demand for solar power to rise by 39 gigawatts for China, Japan, the U.S., Europe, India and Brazil combined through the end of the decade, with China accounting for the largest share at 27 percent. The growth forecast in aggregate, however, is below industry estimates because of their more bearish outlook on solar demand in China and Japan, where government policies could curb adoption and squeeze margins for solar panel and polysilicon manufacturers.

Rooftop solar, both on residences and on commercial buildings, will likely be the main driver of growth in the market, aided by falling installation costs and favorable regulatory treatment in countries, the authors wrote. Customers in Europe, the U.S., Brazil and Japan, for instance, are already able to avoid some or all of their utility bills by installing solar panels. In the long run in the U.S., analysts believe that the energy will be economical in some states without any form of subsidy.

Not all regions may fare as well, however, because the loss of subsidies can make solar less competitive as a power source. "As solar economics continue to improve, there may be further reductions in government support," analysts wrote. "We expect subsidies may fall in the U.S., Europe and Japan, but may remain, and even grow, in China, India, and Brazil."

Analysts also examined which public companies may benefit from rising solar demand. "Under such incentives, we believe solar growth, and returns on solar investments by solar 'integrators' that provide complete solar power solutions to customers, can surprise to the upside," they noted.

In addition, energy storage systems, when combined with the growth of solar power, could disrupt utilities in the U.S. and Europe to the extent customers move to an "off-grid approach," authors wrote. Under this approach, customers could combine solar panels and energy storage to completely eliminate their reliance on the utility grid.

Morgan Stanley Blue Papers address long-term, structural business changes that are reshaping the fundamentals of entire economies and industries around the globe. The full version of this article is available on our Matrix website. Please contact your Morgan Stanley representative for access if needed.

Please note that all important disclosures appear on the Morgan Stanley public website at www.morganstanley.com/researchdisclosures/ .



CRC756248