Stimulus Package Stimulates Chinese Solar Sector

The Chinese solar stocks skyrocketed Thursday morning, apparently on hopes for support from the industry from both the U.S. stimulus package and from China’s government.

There doesn’t seem to be any single reason for the massive rally, but there are some bullish tidbits floating around that bode well for the sector.

The New York Times reports in a blog post that “after several gloomy months, experts say that the stimulus package is beginning — just beginning — to revive interest in wind and solar power.” Among other things, the post quotes a Sharp Solar official as saying one unspecified large solar project that had been delayed by financing issues is now back on track after banks have again becoming willing to back the project.

Meanwhile, DigiTimes reports that China’s government “intends to take a firm attitude to support the local development of solar energy in China,” although it has yet to design an incentive program to subsidize solar projects, and has not set a time table for designing a program since “costs of power generation are still too high.”

Almost all of the solar stocks are posting big gains Thursday morning, with the China-based players showing particular strength. Among the China-based plays this morning:

• Suntech (STP) is up $2.62, or 33.4%, at $10.47
• Yingli Green Energy (YGE) is up 82 cents, or 19.8%, to $4.97.
• LDK Solar (LDK) is up $1.68, or 28.5%, to $7.57.
• China Sunergy (CSUN) is up 45 cents, or 17.9%, to $2.95.
• Trina Solar (TSL) is up $1.54, or 17.8%, to $10.20.
• Canadian Solar (CSIQ) is up 66 cents, or 13.7%, to $5.49.
• Solarfun (SOLF) is up 56 cents, or 15.7%, to $4.13.
• ReneSola (SOL) is up 45 cents, or 17.1%, to $3.08.

Among the U.S. solar stocks:

• Evergreen Solar (ESLR) is up 15 cents, or 8.6%, to $1.90.
• Energy Conversion Devices (ENER) is up $1.27, or 8.7%, to $15.83.
• First Solar (FSLR) is up $4.02, or 3%, to $138.
• GT Solar (SOLR) is up 38 cents, or 7.8%, to $5.25.
• MEMC Electronic Materials (WFR) is up 92 cents, or 5.3%, to $18.14.
• SunPower (SPWRA) is up $2.44, or 10.2%, to $26.48.

Original post

Comments

[Amouna:]

it was time...

Mar 26 01:48 PM

[Zenfar:]

Boy time sure does fly, two years seems like just a few days when you get to be my age....

Mar 26 01:56 PM

[Zenfar:]

Boy two years time sure does fly by seems like just yesterday somebody was saying...

"The future looks grim for the solar sector, Morgan Stanley analyst Sunil Gupta asserts Tuesday morning in an extensive - and extremely dismal - report on the industry."

Maybe he meant two days...

Mar 26 02:01 PM

[aquaculture:]

+100k
VERY late reaction GCL-sillicon, march 17 press release and they're hiring like crazy (always look at the job adds!), so of course it was simple.

Mar 26 02:07 PM

[Daryan:]

The sad thing is, Eric's tone is still negative despite the better news. Come on dude, don't let your personal opinions color your very appreciated journalistic reports that I for one really appreciate.

Mar 26 03:07 PM

[Mad Hedge F...:]

And everything else. The one screaming buy out there now are the emerging markets. The US, Europe, and Japan are now committed to spending trillions of dollars to shock the global economy back to life. This is costing the emerging economies nothing, and gives them a free ride back to prosperity. IT turns out that the smaller economies are financially better off than the big ones, with a decade long export boom blessing them with massive foreign exchange reserves and little debt. China, Russia, India, Brazil, and Turkey will be the big beneficiaries. You can buy the specific ETF’s for these countries, or go with the generic iShares MSCI Emerging Market ETF (EEM), which has already started to outperform US markets in a big way. It’s a once in a century opportunity to buy the highest growth corners of the world’s economy at severely knocked down prices.

Mar 26 03:47 PM

[aquaculture:]

yeah......... for some reason his negative posts always come up--just after you're in heavily..or when you're accumulating...
creepy.

Mar 26 03:55 PM

[aquaculture:]

Hey John you parked it in the wrong place.......I hope. This blog is about sunshine 'n clouds!

Mar 26 04:00 PM

[tginomorebush:]

And the idiot makes no mention of jaso ......... must have heavily shorted ......... barrons and savage......... what jerks

Mar 27 09:27 AM

[Fred W:]

The support for domestic projects was inevitable...I have written about this as the ultimate backstop for Chinese manufacturers--US producers beware. China is setting it up so its producers will be able to sell modules at below production costs but still make "profits" on export incentives that ultimately support economic and political stability in China.

Mar 27 09:35 AM

[Fred W:]

Posted Jan 22, 2009:
Not All Solar Stocks Are Created Equal [View article]
The article fails to mention the support that Suntech is/will receive from the Chinese government. Additionally, the pricing of solar modules will continue to decline and BOS and installation labor wil remain 1/5th of the cost of a U.S. based project...this will open up the largest market in the world to PV (China)--the solar thermal installation numbers in China are astounding so the market is there when the price is "right".
The solar industry in China is perceived as a job engine--the ruling party will not abandon its efforts to ensure economic stability for without it, the party's days in power would be numbered--Suntech will benefit and ultimately First Solar will see much greater competition on price.
Jan 22 10:23 am

On Mar 27 09:35 AM Fred W wrote:

> The support for domestic projects was inevitable...I have written
> about this as the ultimate backstop for Chinese manufacturers--US
> producers beware. China is setting it up so its producers will be
> able to sell modules at below production costs but still make "profits"
> on export incentives that ultimately support economic and political
> stability in China.

Mar 27 09:40 AM

[gebby:]

it is pretty obvious what the growth trends are for solar. it is also obvious that large industries, coal, oil, banking, are all threatened by the potential of solar to displace them.

Mar 27 10:08 AM

[Michael Boyter:]

The days of the sun for power are here. With the world economies in stagnation, the bright light that will generate jobs and push the world out of this sticky pit of recession, is the Clean, Renewable, Inexpensive, Solar and Wind Generated Power Industry. There As usual China is leading the way with their Government pushing incentives at an industry that needs them to remain profitable and take the lead. America will do this also, it's just that we seem to be following more than leading lately. There will be many changes within the next two months when several New Disruptive Technological Breakthroughs, make the news cycles on an international basis. Once again, America will follow the lead of other more progressive nations who are already structured to take advantage of this massive shift in the worlds energy structure. It's going to be very exciting, watch the energy news closely, especially in technologies power by the SUN, such as the Solar and Wind industries. They will both greatly benefit.

Mar 27 10:20 AM

[Alphameister:]

Good comments by John Thomas (even if inappropriately parked) and Fred W. I likewise was confident that Central Planning would pull out the stops to protect their position in one of the world's most promising growth markets.

Mar 28 11:58 AM

[Road Runner:]

gebby, You said "it is also obvious that large industries, coal, oil, banking, are all threatened by the potential of solar to displace them." Even if solar and wind took off at a scale that no one imagined, it would only cause oil, coal, and natural gas use to level off. The emerging markets are increasing their energy use at a very rapid pace. The current financial crisis is only a “hiccup” (or should I say “hic-down”) in the long term world-wide energy use trend.

Mar 29 08:59 PM

[Road Runner:]

From Fred W.
"The support for domestic projects was inevitable...I have written about this as the ultimate backstop for Chinese manufacturers--US producers beware. China is setting it up so its producers will be able to sell modules at beFrom Fred W.
"The support for domestic projects was inevitable...I have written about this as the ultimate backstop for Chinese manufacturers--US producers beware. China is setting it up so its producers will be able to sell modules at below production costs but still make "profits" on export incentives that ultimately support economic and political stability in China. "

I agree. It makes total sense for China to want to be the leading developer of the emerging technology, solar. This is the standard practice sometimes called "dumping" for a one country to drive out competition from other countries to eventually control the world market. Plus, it puts people to work, thus keeping the “natives” from getting restless. Moral of the story is to own at least one Chinese solar company. I own STP.

If China does try to control the world solar market by this means, it may end up "with a tiger by the tail". Solar has a unique demand curve where as prices drop below grid parity, the demand will surge very strongly making it hard for Chinese companies to supply all demand and leading Chinese companies to have to back off some on the price drop. I'm just conjecturing here, and it may turn out to work differently than this. You may draw a different conclusion.

Another thing to keep in mind is that half the cost of a solar system is installation. That is why SunTech, SunPower, and I believe FirstSolar now, are vertically integrated down to installation. They are working to drive down the cost of the whole system. This will temper the affect of China dumping solar product on the world market. Just as an example, if China cuts the price of solar products sold outside of China by 50%, if would only cut the total cost of an installed system by 25%. How this fact affects non-Chinese solar companies, I can only guess. But, it is worth keeping in mind.
low production costs but still make "profits" on export incentives that ultimately support economic and political stability in China. "

I agree. It makes total sense for China to want to be the leading developer of the emerging technology, solar. This is the standard practice sometimes called "dumping" for a one country to dirve out compettion from other countries to evenually control the world market. Moral of the story is to own at least one Chinese solar company. I own STP.

If China does try to contorl the world solar market by this means, it may end up "with a tiger by the tail". Solar has a unique demand curve where as pricess drop below grid parity, the demand will surge very strongly making it hard for Chinese companies to supply all demand and leading Chinese companies to have to back off some on the price drop. I'm just congecturing here, and it may turn out to work differently than this.

Another thing to keep in mind is that half the cost of a solar system is installation. That is why SunTech, SunPower, and I beelive FirstSolar now, are vertically integrated down to installation. They are working to drive down the cost of the whole system. This will temper the affect of China dumping solar product on the world market. Just as an example, if China cuts the price of solar products sold outside of China by 50%, if would only cut the total cost of an installed system by 25%.

Mar 29 09:52 PM

[Road Runner:]

Oops. Something went wrong on the cut and paste from Word. I will post it again - clean.

Mar 29 09:54 PM

[Road Runner:]

From Fred W.
"The support for domestic projects was inevitable...I have written about this as the ultimate backstop for Chinese manufacturers--US producers beware. China is setting it up so its producers will be able to sell modules at below production costs but still make "profits" on export incentives that ultimately support economic and political stability in China. "

I agree. It makes total sense for China to want to be the leading developer of the emerging technology, solar. This is the standard practice sometimes called "dumping" for a one country to drive out competition from other countries to eventually control the world market. Plus, it puts people to work, thus keeping the “natives” from getting restless. Moral of the story is to own at least one Chinese solar company. I own STP.

If China does try to control the world solar market by this means, it may end up "with a tiger by the tail". Solar has a unique demand curve where as prices drop below grid parity, the demand will surge very strongly making it hard for Chinese companies to supply all demand and leading Chinese companies to have to back off some on the price drop. I'm just conjecturing here, and it may turn out to work differently than this. You may draw a different conclusion.

Another thing to keep in mind is that half the cost of a solar system is installation. That is why SunTech, SunPower, and I believe FirstSolar now, are vertically integrated down to installation. They are working to drive down the cost of the whole system. This will temper the affect of China dumping solar product on the world market. Just as an example, if China cuts the price of solar products sold outside of China by 50%, if would only cut the total cost of an installed system by 25%. How this fact affects non-Chinese solar companies, I can only guess. But, it is worth keeping in mind.

Mar 29 09:54 PM

[Pablodiablo:]

Fred, I would like to elaborate on your writing.

Total cost of solar project: 60,000
Cost of solar panels: 30,000
Cost of Installation and parts: 30,000

Our government will subsidize roughly 50% of the total cost. That means the customer is paying 15,000 and our government is paying the other 15,000 for just the solar panels. This means for every 60,000 installation, Suntech is making roughly 30,000 dollars, half of which are subsidized. Where is the subsidized money coming from? It's coming from you and me, whether we consent to it or not, through our utility bill, and taxes. Even more subcutaneously, it is money which is borrowed from the Chinese government to "stimulate" our economy. The money incentive should go to people for making a flow-chart showing this entire process. They certainly will not use these charts to put in Business School books, unless it is to warn student how it's NOT supposed to work. I can't see how anyone can argue that this is good for the economy? Where are all the people with their Anti-Walmart bumper stickers?? I guess they forgot they lost their job because their employer was asked to move their manufacturing to China to save .40 per item. Pardon me if I'm wrong, but isn't price supposed to be a natural intersection between supply and demand in an open economy? Maybe I missed that part of Economics 101? Moral of the story: Cheaters never prosper- perfect example: Our Current Economy....

Sep 02 11:24 PM

[Pablodiablo:]

Oh, and I forgot to mention....

You're not getting rich... The Chinese and our Politicians are....

Sep 02 11:26 PM