Solar Stock Review:Spring Summer 2009
Solar is fundamental to our efforts to produce energy withoutdestroying our environment. Despite this fact, some were unconvincedabout solar’s prospects in 2009 and beyond.
At the start of this year JPMorgan analyst Christopher Blansettindiicated that he expected solar prices to "fall and bottom out laterin the year." Blansett further warned investors "not to expect arecovery in solar stocks in the event of a broader economic rebound in2009" Blansett added that constrained credit markets could "bring thealternative energy industry to a screeching halt."
AlthoughBlansett’s dire warnings may not be entirely accurate, solar marketsare not immune to this recession and they have been hit hard by thecurrent economic situation. The solar sector is feeling the effects ofthe boom-bust cycle we’ve seen in the global economy and energyinvestment over the past two years has had a destabilizing effect.
Plannedincreases in solar power production, positive returns and promisinginnovations, give us reason to believe that solar stocks will performwell.
Yale 360reports the US Interior Secretary Ken Salazar said "his department isstudying whether 670,000 acres of federal lands in six Western statesare suitable for the construction of large-scale solar power projects."Salazar said this administration is doing “everything we can to put thebulls-eye on the development of solar energy on our public lands.” Hefurther predicted that "by the end of next year, 13 commercial-scalesolar power projects could be under construction on U.S. governmentlands in Nevada, Arizona, California, Colorado, New Mexico, and Utah."
Withseveral new commercial scale solar facilities currently being built inFlorida, the state is a good example of America’s increased reliance onsolar energy.
In Europe, Germany and Spain remain internationalsolar leaders and in France EDF Energies Nouvelles and US firm FirstSolar Inc (FSLR) recently announced they will build the countrieslargest solar panel manufacturing plant.
The Asian solar marketoffers cause for bullish optimism. Government investment will pushJapanese demand for solar panels up for the first time since 2006 andmake Japan much more attractive to foreign solar power investors.
TheJapanese government recently announced that it will be infusing $9billion dollars into the solar sector. This will increase Japan’s solarenergy market by 2000% over the next decade. On June 9, Prime MinisterTaro Aso said that solar power (and electric cars) will play a key rolein lifting Japan out of recession and encouraging robust growth. The PMforesees a cleantech industry worth 50 trillion yen (about $510billion) by 2020. He wants solar power generators installed at roughly37,000 public schools in the next three years. The total increase wouldboost Japanese solar production twenty fold by 2020.
Nowhere issolar performing better than in China. After lagging behind theindustrial benchmark for months, shares of Chinese solar power firm,Suntech Power Holdings Co., Ltd. (NYSE:STP) tripled the Dow in July.Chinese owned Canadian Solar (NASDAQ:CSIQ) announced that it willtarget 12,000 kilowatts of yearly solar cell sales in Japan from itsChinese production base.
According to Lux Research,the future of solar power is bright. Although widespread grid paritywill take a decade, in certain locations solar is already approximatingcompetitiveness with traditional energy.
“The solar industry iscoming of age, and the metrics for judging solar technologies areshifting,” said Ted Sullivan, Senior Analyst at Lux Research, and leadauthor of the report. "This shift enables a more direct comparison toconventional generation types, and enables more rigorous analysis ofsolar technology on the basis of life-cycle costs, payback period, andreturn on investment. In subsidized markets, the internal rate ofreturn can reach well in excess of 10%, actively fuelling demand.”
Atthe end of May SunPower (SPWRA, SPWRB) announced the latest version ofthe SunPower(R) 315 Solar Panel, the most powerful solar panel on theplanet. It is interesting to note the parity between the stockperformances of industry leaders SunPower and FSLR. Earlier in thisdownturn cost was trumping efficiency in the solar sector, nowSunPower’s superior efficiency is keeping pace with First Solar’s lowcost thin film panel.
The market for solar technologies is nowmore sophisticated. Increasingly solar power will compete withtraditional sources of electricity. Falling silicon prices (down fromnearly $1.50 per pound to just above 50 cents) has helped to reducecosts for silcon reliant solar panel manufacturers. But the primarydriver for solar energy production will continue to be the fact that itis carbon-free, uses no water and produces no waste.
Despite therecession and contrary to certain dire predictions, some solar firmsare doing very well and as we recover the solar sector is destined togrow.
Richard Matthews is a consultant, sustainable investor, writer and owner of The Green Market Oracle, a leading sustainable business blog that covers the convergence of sustainable capitalism and the global environment.The Green Market is one of the most comprehensive resources for information and tools on sustainability. Follow The Green Market's twitter feed and see the Facebook Fan Page. Richard is a contributor to more than 50 publications. Find him on Facebook and Linkedin.
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