Enphase Energy (ENPH) NEM 3.0 Sees High Distribution in California

Zacks Equity Research

31 May 2024 at 9:37 am·4-min read

Enphase Energy, Inc. ENPH recently revealed that installers throughout California are increasingly deploying its net energy metering (NEM) 3.0 product solution, which includes the Enphase Energy System and cutting-edge software. As the state of California is going through the rapid transition from NEM 2 to NEM 3, such enhanced deployment of its product should fetch solid revenue growth for Enphase.

What Led to ENPH’s Growth in California?

The goal of Enphase NEM 3.0 is to enable installers to provide affordable and effective solar and battery systems that are customized to meet the demands of consumers. It also aims at maximizing customers’ return on investment (ROI) under California's new net billing tariff.

It is imperative to mention in this context that under NEM 3.0, homeowners in California are striving for energy-independent and cost-effective solutions, which Enphase Energy is currently offering. As NEM 3.0 incentivizes homeowners to use their energy, Enphase Energy System’s advanced built-in software and newly-configured battery system allow automatic energy self-consumption while also offering backup power in case of a grid failure.

Such features of ENPH’s NEM 3.0 compatible suit of products must have boosted deployment of this product across California.

Will Enphase Energy’s Growth in California Sustain?

The state has seen a spike in demand for backup power, which presents a solid growth prospect for ENPH, with its portfolio containing products like Enphase Energy Systems, which give homeowners the freedom to modify their home energy systems to accommodate different rate structures.

To this end, it is imperative to mention that California is steadily progressing with the buildout of battery energy storage systems with more than 6,600 megawatts (MW) online as of October 2023, per a report published by the California Energy Commission. By 2045, the state is expected to require 52,000 MW of energy storage capacity to fulfill the demand for electricity.

This projection surely sets the stage for battery storage makers like Enphase Energy to prosper on the growing energy storage demand in California. We may expect more deployments of its NEM 3.0 configured energy systems in this state going ahead.

Peers to Benefit

Apart from Enphase Energy, solar players who stand to benefit from the booming energy storage market in California are SunRun RUN, SunPower SPWR and Canadian Solar CSIQ.

In May 2024, Sunrun revealed that it had connected more than 16,200 customers' solar-plus-storage systems to help power California's electrical grid during the hot summer months. Sunrun's CalReady power plant will alleviate system pressure by giving crucial electricity to areas in need across the state, lowering costs and helping to avert power outages.

The Zacks Consensus Estimate for RUN’s 2024 bottom line, pegged at a loss of $1.83, suggests a solid improvement from the prior-year quarter’s loss of $7.14. The stock has surged 44% in the past month.

Headquartered in California, Sunpower offers energy storage systems in the state. By gathering extra energy throughout the day and distributing it as needed to power necessary equipment during an outage, its Equinox system with the SunVault Storage solution provides households with an efficient storage option and lessens their need for grid electricity.

The Zacks Consensus Estimate for SPWR’s 2024 bottom line, pegged at a loss of 61 cents, suggests a solid improvement from the prior-year quarter’s loss of 91 cents. Its shares have rallied 44.7% in the past month.

Canadian Solar is the project developer of Crimson Storage, a 350 MW / 1400 MWh standalone energy storage project, which is in operation and providing flexible capacity to the California grid. As Crimson Storage is the world's largest battery storage project to come online in a single phase, it is also the second-largest energy storage project in operation right now.

CSIQ has a long-term (three to five years) earnings growth rate of 25%. The Zacks Consensus Estimate for its 2024 sales suggests an improvement of 2.6% from the prior-year figure.

Price Movement

In the past six months, Enphase Energy’s shares have risen 22.7% compared with the industry’s average growth of 16.5%.

Image Source: Zacks Investment Research

Zacks Rank

ENPH currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Enphase Energy (ENPH) NEM 3.0 Sees High Distribution in California

What Led to ENPH’s Growth in California?

Will Enphase Energy’s Growth in California Sustain?

Peers to Benefit

Price Movement

Zacks Rank

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