Edison International (EIX), PG&E Corporation (PCG), NRG Energy Inc (NRG): Beware of the Rooftop Solar Market

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NRG Energy Inc (NYSE:NRG) does own 44% of the South Texas Project nuclear plant, but the facility is operating and does not carry the headaches of the Edison’s Onofre plant. Thanks to its forward looking policies, NRG Energy Inc (NYSE:NRG) has been able to grow its customer base for 10 consecutive quarters. Mild weather has put a dent in its earnings this year, but by 2014 it is expected to boost its EPS to $1.42 thanks to solar growth and stronger overall energy demand.

Stuck between a rock and a hard place
SolarCity is a dedicated solar installer under attack. Now that utilities are starting run subsidiaries that purchase, install, and operate rooftop solar systems, SolarCity is facing a huge increased competition from very well financed firms.

SCTY Revenue Quarterly Chart

SCTY Revenue Quarterly data by YCharts

SolarCity is growing with 53 megawatts deployed in the second quarter of 2013. The company expects to be cash flow positive by the last quarter of 2013. Even as the number of Megawatts deployed grows, its recent quarterly revenue only grew to $37.95 million. SolarCity is facing more competition from billion dollar utilities with better access to the capital markets and falling solar costs, thus putting pressure on prices.

Going forward SolarCity should become more profitable as existing customers become a larger portion of its revenue, but that does not erase the difficulties the company is facing from a maturing market. To try to gain more market share SolarCity recently acquired Paramount Solar, but it is still far from certain how things will play out.

The difficulties with the Onofre nuclear plant, big upgrades to the grid, and rooftop solar are expected to hurt PG&E Corporation (NYSE:PCG)’s and Edison International (NYSE:EIX)’s earnings for some time. Utilities are starting to realize that there may be no way they can stop rooftop solar, and they have joined the market. Now SolarCity’s prospects have also taken a turn south due to increased competition from well financed utilities. NRG Energy Inc (NYSE:NRG) is the one utility that is really worth taking a second look at, as it has embraced solar and is not stuck with an expensive nuclear decommissioning project.

The article Beware of the Rooftop Solar Market originally appeared on Fool.com and is written by Joshua Bondy.

Joshua Bondy has no position in any stocks mentioned. The Motley Fool owns shares of SolarCity.

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