How General Electric Can Build a Renewable Energy Powerhouse
General Electric (NYSE:GE) is facing a number of challenges, but its biggest may be turning around an energy business that can’t seem to overcome a slowing fossil fuel power generation market. The $35 billion power business, which includes building and maintaining fossil fuel power plants, shrunk 19% in the second quarter of 2018 to $7.6 billion in revenue and net income plunged 58% to $421 million.
The coal power business is dying a slow death and even natural gas power plants have come under pressure from sources of renewable energy like wind and solar, which are now the lower cost for new power plants. The answer for GE long term may simply be to buy up the best renewable energy assets around and create a next-generation power business.
Why renewable energy assets work together
GE already has a large wind energy business, which generates about $9 billion in revenue annually. But wind revenue has stagnated because cost reductions are offsetting any volume growth the industry may have. Wind is growing overall, but that doesn’t mean revenue is growing at GE Wind.
To supercharge growth, I think GE should add complementary revenue streams from solar, energy storage, and even EV charging. The easiest way to get into these markets is by acquiring the industry’s leaders.
First Solar (NASDAQ:FSLR) is the industry’s leading utility-scale solar panel supplier and its most profitable company long-term, not to mention $2.0 billion of cash sitting on the balance sheet. Buying First Solar would give GE a strong position in utility-scale solar, which is the largest solar market in the U.S. and worldwide.
SunPower (NASDAQ:SPWR) is a leader in high-efficiency solar panels, which are ideal for residential and commercial solar applications, where space is a constraint. SunPower has faced challenges trying to develop its own solar projects and competing against companies like First Solar in utility-scale projects, but it has strong margins and an improving competitive advantage in high-efficiency solar, which would complement First Solar’s business under GE’s umbrella.