How will America Capitalize on Green Revolution and Solar Power?

The debateover future energy alternatives continues as countries deliberate ongovernment subsidies and clean energy companies develop new technology,while fossil fuel companiesadjust supply based on market pricing of oil, natural gas and coal.However, energy stocks have been recently outperforming the marketaccording to several market analyst firms.

Coal stocks have shownremarkable growth, despite a global recession that has dampenedindustrial production. When coal miner Alpha Natural Resources boughtrival Foundation Coal last month, coal-related stocks soared. Bothtypes of companies (solar and coal) make up Investor’s Business Daily(IBD) “Energy-Other” stock group, which as of last week ranked No. 8among IBD’s 197 industry groups, up from No. 189 six months ago. Manyanalysts believe consolidation is good for coal producers for variousreasons including tightening regulations after tragic fatal accidentsin recent years, streamlined operations and better supply control togauge volatile price fluctuations. 

Pressured by competition fromnatural gas, "the price of coal has bottomed out," according to analystBrian Yu of Citigroup. The spot price of coal is now approximately$40-50 per ton vs. approximately $150 per ton at last year’s peak;thus, the cost of production is essentially above the selling price. 

Incomparison, polycrystalline silicon (polysilicon) prices, a majorcomponent of most solar panels, also play a big role in manufacturingcosts. Oversupply has eroded polysilicon prices to about $80 perkilogram from last summer’s peak of around $400 per kilogram. The lowersilicon costs are beneficial for price-competitiveness for solar energyversus conventional fossil fuels and have aided solar companies fromall over the world in signing contracts from U.S. utilities.Cutting costs and improving panels’ efficiency have always been themantra of the solar power industry. However, lower polysilicon pricesare more beneficial for producers of high efficiency crystallinesilicon solar cells; thus, companies using technology which utilizesless silicon substituted with less expensive materials but at a lowercost and efficiency are in a less competitive position. 

However,First Solar’s "thin film" glass panels, using considerably lesspolysilicon than approximately 90% of the overall solar industry, madefrom a layer of cadmium telluride, have demonstrated the lowest cost inthe industry at 93 cents per watt. Interestingly enough, China’sYingli, one of the largest manufacturers of solar products in the worldas measured by annual production capacity, still has not been able tobreak $1 in cost per watt barrier. First Solar, headquartered inPhoenix, AZ, plans to lower the cost of solar power to 65 cents perwatt by 2010-12 by expanding manufacturing facilities in Malaysia,where the company reportedly produces modules for 20 cents per wattcheaper than at its Ohio plant, according to a company spokesman.  

Thus, First Solar hopes to achieve gridparity, which is solar equivalency with other energy sources in termsof price per watt, as early as 2010. This term is not fully transparentsince, like politics- solar power is local as well, with respect toutilities, which offer varying cost per watt in different geographiclocations. Grid parity without incentives is already a reality inCalifornia, New Jersey, New York and Hawaii and is emerging quickly inmany regions of the world. 

One of the myths of government subsidies for green energy or the clean tech sector is that U.S. or state legislation willfully support domestic companies and jobs, which is not the case.Actually, a bill designed to offer incentives for consumers to installsolar panels on their homes and hoped to create a certain number of green jobs maylead to environmental benefits for the U.S.; yet the panels mayultimately be manufactured overseas in a country where the cost oflabor is significantly less than the U.S. Moreover, if First Solar,having only business offices in Arizona, ever decides to build a solarpower plant in this state, taking advantage of new potential corporate tax breaks,the U.S. and Arizona would be losing out on the full benefit of greenjob initiatives due to the outsourcing of solar panel production toMalaysia. One must play Devil’s Advocate to some degree when evaluatingclean energy legislation in order “to see the forest from the trees” sothat comprehensive policies may be enacted and that the U.S. simplydoes not substitute Middle Eastern oil for Asian solar panels, as anexample. 

Lowering the cost of solar cell production is not theonly issue on the table. In general, solar is still only responsiblefor less than 1% of American electricity, while numerous states haveannounced mandatesto achieve as high as nearly 25% for combined renewable energy sourcesincluding solar, wind, and geothermal by 2025. There is clearlysignificant room for growth. It is possible that future solar leaderswill not even be first to market with a core technology, but rather areones whom have adapted to competition, learned from customers,integrated their technologies with related innovations, and bundledtheir physical products with creative service and financing programs. 

Another misconception pervasive in the general pubic is that solar panel installations on homes arethe most efficient way to harness solar energy. In contrast, "solarfarms" represent an underutilized source for solar energy. It has beendocumented in Semiconductor International that the United States couldsupply its entire energy demand by covering just 1.6% of its land areawith solar cells. Furthermore, putting solar cells on 1% of the area ofglobal deserts would be sufficient to produce electricity for all thepeople in the world.

Speaking of solar farms,Pacific Gas and Electric, a large West Coast utility, signed an800-megawatt solar power contract with Sunpower and Optisolar, bothAmerican-based companies, in August 2008, and the deal is expected togenerate enough energy for 239,000 homes in California. Sunpowerharnesses solar power from monocrystalline silicon solar cells, whileOptisolar’s thrust relies on amorphous silicon cells, which aretypically lower cost with lower efficiency; however, both technologiesare feasible for utilities. The difference between residential solarinstallations and utilities is that the latter does not really careabout style and aesthetic appeal. As a result, the solar industry hasmany different applications of various sorts with varying factors forconsideration that offer market opportunities for the numeroustechnology options being fabricated. 

Another American basedcompany, Applied Materials (AMAT), has developed a tandem junction thinfilm turnkey production line that, according to AMAT, can produceenough panels to generate 80 MW of electricity each year, or enough topower over 35,000 homes during peak hours. In addition to theenvironmental benefits, a solar factory containing one SunFab™ line hasthe potential to generate an estimated $2 billion of economicdevelopment and create over 2,500 local jobs over five productionyears, according to an independent analysis noted in SemiconductorInternational.  

The United States may be able to remarkablyreduce foreign oil imports and pollution-oriented sources of fossilfuels such as coal and natural gas over the next 20 years; however, thenature of emerging legislation at both the federal and state level willdictate how well the country capitalizes on the green revolution, including job creation and the trade deficit, and the transformation from high carbon emission industrialization to clean alternative energy sources such as solar power.

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Image: Emblematic image for capitalizing on American Green Revolution. (blog.wired.com)

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