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Solar Energy Stocks: Experts Say This Sector Is Headed Down, Here’s Why You Shouldn’t Listen
by David Fessler, Energy and Infrastructure Expert
Friday, December 11, 2009: Issue #1156
By the time 2009 is in the books, the record will show that solar energy stocks endured a tough year. Hardly surprising, with many Wall Street analysts (yours truly not among them) lambasting the sector for much of the year.
What’s more, they also expect the carnage to continue into 2010, with losses predicted for as many as half the world’s solar companies.
The analysts’ “thought” process – and I use that term loosely – goes something like this:
- First, they suggest that a “huge” oversupply of polysilicon (the raw material used to make silicon-based panel assemblies) exists. But this is only partially true, as increasing panel sales are rapidly eating into this oversupply.
- The analysts’ next miscue is over new thin-film panel technologies. They predict companies producing panels based on the new thin-film designs are doomed because the oversupply of polysilicon will keep poly-based panel prices too low for the thin-film guys to compete.
Talk about a myopic view if there ever was one. I suspect many of these analysts will be eating crow instead of turkey at Thanksgiving next year. Here’s the real story on the solar energy sector…
Note to Experts: Refill Your Glasses
Before I go any further, let me say that some solar energy companies will lose money in 2010. Others won’t make it at all. But that’s normal in any competitive environment.
But the experts need someone to refill their half-empty glasses, so I’ll play the role of bartender.
The truth is that the solar enery sector – particularly thin-film panels – is growing at a rapid pace. It’s one of the reasons why Trony Solar Holdings Company Ltd. (NYSE: TRO) is expected to go public in the next few weeks. Trony is China’s largest manufacturer of thin-film based solar modules.
Its IPO – underwritten by JP Morgan (NYSE: JPM) and Credit Suisse (NYSE: CS) – is expected to raise over $200 million. And it’s oversubscribed, too. That doesn’t sound like an industry in trouble to me.
And it certainly doesn’t sound like an industry that’s doomed to replicate the 1980s, when 400 solar panel manufacturers got whittled down to just five as the market collapsed.
The market for solar photovoltaic panels (those that produce electricity) is increasing rapidly. All the industry needs is a little change in perception…
Solar Energy Execs Sound Off
At the Solar Power International 2009 show in Anaheim last month, solar energy company executives offered their opinions on the state of the industry, and how they view the next few years. It’s well worth listening to these insiders, since they know more about the inner workings of the solar energy business than the analysts.
- Ron Kenedi, Vice-President of the Solar Energy Solutions Group at Sharp Electronics (Nasdaq: SHCAY), is very positive about 2010: “We’re seeing growth in all segments of solar, starting in the last few months. We’ve seen growth in the residential sector and new ways for projects to be financed. Utility-scale projects are starting and even mainstream solar is starting. All segments of the solar industry are getting stronger.“
- Zhengong Shi, Chairman and CEO of Suntech Power Holdings (NYSE: STP), is so bullish about the prospects for solar in the United States that his firm is building a new manufacturing plant here: “Last year, the Spanish market was almost half of the global market. Apart from the Spanish market, all other markets grew at 50-100%. That’s a positive sign. We’re excited about the U.S. market because the new administration is positive and supports rules for renewable and solar and there is increased awareness in the general public. We see our market share continuing to gain in the U.S.“
- But Jerry Wolfe, CEO of privately held groSolar, really articulated the crux of what’s holding back solar from truly going mainstream. And it’s not necessarily about more technological advances: “The technology is in place and improving every year. We’re finding that residential and commercial buildings are less expensive (with solar panels) than (if powered only by) a utility. People don’t understand that. Our biggest problem is that solar requires a cultural change and acceptance. That’s our biggest hurdle.“
Flipping the Solar Energy Switch
Wolfe’s comments remind me of the famous line that IBM Chairman Thomas Watson Sr. allegedly said regarding personal computers in the 1940s: “I think there is a world market for about five computers.” At the time, IBM was the largest mainframe computer maker in the world.
Clearly, the wrong people to ask about new technology are the incumbent technologists. Ask fossil fuel producers, or the utilities that use fossil fuels about solar power, and there’s no question you’ll get a biased view. Resistance to change and the adjustment(s) that change requires is part of human nature.
We can sum up the one real force that is driving the solar industry, both now and in the future, in one word: innovation. It’s something that the United States has always prided itself on and that hasn’t changed.
Here’s the deal: One year from now, when many solar analysts are stuffed full of crow, the solar industry will still be introducing new products. And many solar companies will be well on their way to continued profitability in this promising sector of the alternative energy space.
Good investing,
David Fessler
P.S: Before we wrap things up this week, a quick reminder about the next Investment U conference. Until January 1, 2010, you can take advantage of a generous discount and use it to attend one of the year’s best and most keenly anticipated investment conferences.
I’ll be speaking at the event, as will my fellow Investment U editors – Alexander Green, Louis Basenese, Karim Rahemtulla, Marc Lichtenfeld, and Lee Lowell, plus many more.
The time and place for your diary is March 16-20, 2010 at the five-star Grand Del Mar Resort in San Diego, California.
You’ll receive profitable investment ideas, strategies, tips and recommendations, plus our outlook for 2010. You’ll also have a chance to participate in workshops and educational sessions. Click this link to get full details and reserve your spot. Or call: 800.926.6575 (ext. 105 or 106) or 561.243.6276.
- Solar Energy: A Bright Spot In The Alternative Energy Sector
- First Solar (Nasdaq: FSLR): Stock of the Day
- Solar Power: The Fastest Growing Energy Source In The World
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9 Responses to “Solar Energy Stocks: Experts Say This Sector Is Headed Down, Here’s Why You Shouldn’t Listen”
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David Fessler is an Advisory Panelist for Investment U and The Oxford Club, one of the world’s most exclusive and prestigious networks of private investors.
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December 11th, 2009 at 12:38 pm
There were not any computers in 1940, FYI article on comment by frm. Chmn. of IBM
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December 11th, 2009 at 12:48 pm
I suggest you check the acuracy and validity of your Tom Watson quote “…five personal computers”. PC’s were not commented on until the late 70’s. I suggest he did not say “personal”, but was referencing any computer, which Univac brought to market in the mid 50’s and IBM followed inthe late 50’s. He was of course wrong in his prediction, due to his conservative nature in the business, which sustained the Co. thru the 30’s and later became, even still, one of the biggest and greatest.
/s/ a former IBM’er of the 50/60’s.
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December 11th, 2009 at 1:20 pm
Are you certain it is innovation that is driving the solar energy bus and resulting investment opportunities that you percieve, or political pressure and threats from the Obama/Pelosi/Reid political juggernaut? What are the costs per kilowatt of these solar panel technologies, and the associated circuitry and batteries needed to make them operable installations?
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December 11th, 2009 at 2:15 pm
All the IPOs at the top of the tech bubble were oversubscribed.
People were lining up to payu above assessment at the peak of the real estate bubble.
Milli Vanilli was once a top-20 act with sold-out concerts worldwide.
Get real. First Solar, to name one, is going much lower and so is the price of gas and the generalo equity markets so probably most, if not all, solar companies will suffer for the forseeable future.
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December 11th, 2009 at 3:28 pm
I think citing Trony Solar was a bit of a miscue. I just read on Green Chip that that IPO got shelved indefinitely. Are you missing something?
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Investment U Reply:
December 14th, 2009 at 9:58 am
Ryan,
That information came out after I wrote the article. Timing is everything.
All the best,
Dave
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December 11th, 2009 at 4:23 pm
Have you guys heard of Dyesol (DYE.ASX), the little Australian company with a policy of spreading its technology around. Things are happening in Wales, Korea, China etc and now USA?
They have production ramping up with Glass manufactures and a sheet metal cladding project underway.
They even have a prototype military camouflage, which can be deployed in the field to charge things up!
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December 11th, 2009 at 4:27 pm
Solar stock companies are similar to auto companies
a hundred years ago. We needed both, but only a few big companies will survive. There will be many mergers in the next decade, and if you pick the top companies you will make a fortune.
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December 11th, 2009 at 4:30 pm
The big problem with solar is that with current technology it takes many times more energy to build than it produces. Solar panels are made by burning coal and oil to operate the mining and manufacturing process. The output factor is .2 to .1 or less. You have to reduce this by half or more for fixed panels. Weather also will reduce output by a third. The panels also lose 2-3% per year from aging. The power has to be inverted to be used causing more loss. You end up averaging 1-3% of the rated output.
I have not seen any manufacturer claiming that his panels produce energy. The pitch is always cost per rated watt. Watts are not a unit of energy! You will probably never get rated output from a solar system and no output most of the time so the figure is almost meaningless.
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