We see at least four structural problems facing existing public solar power companies:
1. There is risk that some new entrant will leapfrog them by developing a better, disruptive technology.
2. Solar energy has to compete with the memory chip industry for its raw semiconducting materials, which, much like corn, gasoline and ethanol, breaks the link between input cost and selling price.
3. Competition comes not just from other producers of solar energy, but from other producers of electricity from other alternatives and conventional sources. On a LCOE basis, solar will usually lose on pure economics. Thus,
4. Demand is heavily reliant on subsidies that will inevitably be reduced or phased out....
...On point #1, we noted an article in the July 25 Economist magazine about two private Israeli companies (GreenSun Energy and 3G Solar), each with a promising-sounding technology. We won’t try to summarize them here, but the point is that this is one of many examples of pre-commercial technology that could potentially render current production methods obsolete, very quickly....MORE
Tuesday, July 28, 2009
Solar Disruptions: The Economist highlights the problem of picking winners
From E4 Capital, LLC: