Tuesday, March 31, 2009

A Bifurcated Market in Solar Stocks (ENER; FSLR; LDK; SPWRA; TSL; YGE)

The American solar stocks are not doing well: Energy Conversion up 1/2%, First Solar down 3%, Sunpower down 3%. In contrast the Chinese solar's are showing a bit more green: LDK up 2%, Trina up 1%, Yingli up 1%.

earth2tech asks "Is It a Solar Bottom? Analysts Say No".
This weekend in a major piece, Barron's said:

Nightfall Comes to Solar Land
A glut of silicon threatens First Solar -- and other low-cost panel makers.

A YEAR AGO, REFINED silicon for solar cells cost 450 bucks a kilo on the spot market. You can have it today for closer to 100 and if you wait a month it may be cheaper still. Thanks to the workings of international capitalism, the 90% margins available in last year's market spurred silicon-factory expansions around the planet. But the new supply arrived just as end-market demand for solar panels got eclipsed by faltering government incentives, lower oil prices and the world financial freeze.

Cheaper solar silicon is of course a great thing for the planet's living creatures. But solar companies and investors who planned for silicon that was scarce and high-priced must adjust their business models for a glut that looms larger than most anyone expected. New government subsidies will help in the U.S. and in China, which energized solar stocks last week with a plan to help China's struggling photovoltaic industry. Lower prices will also stimulate sales volumes as solar panels become cost-competitive with fossil-fueled power. The question is whether solar energy's volume producers will end up resembling the high-margined Intel or the profitless memory-chip makers. "An industry with 30 suppliers would be a nightmare," says analyst Dan Ries of the brokerage firm Collins Stewart. The "flash-memory market managed to be a nightmare with just 2½ suppliers.">>>MORE

Meanwhile Scientific American had a piece last week:

Stimulus Appears to Be Sparking Alt-Energy Revival

Why the difference? First off, companies can do well as stocks languish. You knew that. And SciAm doesn't employ many analysts. Second is a misperception of the stimulus' effect on solar: It's not going to be as big a many had dreamed. These are rent-seeking businesses, if government largesse is directed at job creation, it is not directed at profit maximization. I had a comment at Environmental Capital back in December to make the point:

The key to greencollar jobs is inefficiency. The more labor intensive the energy production the more people you will employ.

Doing a reductio ad absurdum, you would construct a human powered generator.
At a spacing of one meter, a 950 mile diameter wheel would employ five million people.
At 1/10 horsepower per person you would generate 3 million kWh/day.
Of course paying even the minimum wage gets your cost up to the $90.00 kWh range (i.e $80,000/month for the average home’s usage) but you’ve put 5mm folks to work.

This is an extreme example but the concept is pretty well fleshed out in the literature.

Comment by Climateer - December 10, 2008 at 11:49 am

Third, it is no longer a homogeneous, run with the pack, industry. The Chinese solar's will be favored by the Chinese government. And catch a break from the decline in silicon costs. Investors are going to have to know what differentiates these companies, it's not 2007 and never will be again.