Morgan Stanley's Renewable Energy Stock Picks For 2015

A recent Morgan Stanley report focused on the future of renewable energy. Analysts discussed long-term changes that will come about in the sector in the coming years.

Solar Weakness

Analysts see several factors negatively impacting the solar industry in upcoming years. First, as the industry continues to strengthen, subsidies and other government support will likely be reduced or eliminated. In addition, analysts see physical limitations on solar energy, such as a lack of suitable land available in countries such as India.

Solar Strength

The report indicated that rooftop solar should provide a major source of demand in the future. The cost of rooftop solar panels for both houses and businesses is becoming less cost-prohibitive, and installation of solar panels is becoming more realistic for the average family’s budget.

Analyst Stephen Byrd explains that solar customers around the world are able to reap the benefits of a favorable regulatory environment. "In Australia, Europe, the US, Brazil, and Japan, residential and commercial customers are able to avoid some portion or all of their utility bills by installing solar panels."

Related Link: Morgan Stanley: Apple's iPhone Demand Tracking Above Expectations, Demand In China Surging

Tesla's Technology

Analysts see Tesla Motors Inc's (NASDAQ: TSLA) energy storage technology playing a major role in renewable energy. "We believe there is not sufficient appreciation of the magnitude of energy storage cost reduction that Tesla has already achieved, nor of the further cost reduction magnitude that Tesla might be able to achieve once the company has constructed its ‘Gigafactory,’ targeted for completion later in the decade."

Stock picks

Morgan Stanley sees the following companies as major beneficiaries of the current alternative energy environment:

• Tesla
• Sunedison Inc (NYSE: SUNE)
• SolarCity Corp (NASDAQ: SCTY)
• NRG Energy Inc (NYSE: NRG)
• NRG Yield Inc (NYSE: NYLD)
• Abengoa Yield PLC (NASDAQ: ABY)
• NextEra Energy Partners LP (NYSE: NEP)