Solar's Dead Cat Bounce May Be Over 31 comments
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China's news on a solar subsidy initiative has driven a short covering frenzy in the last two weeks. Suntech Power (STP) zoomed up almost 300% to $14 from a low of $5; LDK gained 70% from $3.75 to $6.8; Canadian Solar (CSIQ) gained 120% from $3 to $6.7; TSL gained 100% from $5.6 to $11; Solarfun (SOLF) rallied from $2.27 to $4.4. Thursday's downturn in the solar sector is difficult to swallow, especially when the DJIA rallied 3% ahead of the G20's conclusion. Investors have started to take profits and are waiting for the euphoria to settle down.
Volume has been drying up in the last few days while stock prices are still climbing. This may signal to investors that this is a dead cat bounce with no further support from fundamentals expected. Investors will realize the help may not come early even though the government has planned to support the domestic renewable energy industry. A good example: U.S. President Obama sent a message in 2008 that he is going to support the solar and wind industry, yet these stocks have not rallied because according to the White House, federal assistance to the industry will not come until 2010.
As a result, solar companies such as First Solar (FSLR), Sunpower (SPWRA), Energy Conversion Devices (ENER), GT solar (SOLR) and Evergreen Solar (ESLR) will have tough quarters for the rest of 2009. Recently Energy Conversion reduced its third quarter outlook and said it would slow expansion plans because of the weakening economy. We don't see the Chinese solar stimulus likely taking effect until mid-2010 and so the next two quarters will be under pressure.
Another concern is that low solar panel prices are pressuring the margins of most Chinese solar companies. In a recent bidding war over a solar farm in China, one company offered a price of $0.69/kW. The company is going to lose money if the deal goes through at the proposed price but competition is so high and not many projects are available at this moment. There are currently over 30 solar companies in China and more start-ups are planning on coming to market according to Xinhua newsnet.
Disclosure: Long FSLR
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This article has 31 comments:
It is hard to take an article seriously with errors/misprints like this! At best the author is off by a factor of 1000.
couple of months when solar bounces after the collapse of the dollar and commodities fly up.
LDK would be 81.3% not 70% so why not round to 80% instead of 70%
If the facts are wrong, then the conclusions are too!
As at this time we know oil barrels will raise really high.
And if Obama is intelligent he empower Solar in a bigger hurry.
Benefit is you have a good payback time ratio, due to minuscule cost of maintenance or labour.
Solar easy to install. En Just standing in the field.
If Obama wants his green invested money back , this is a good way to do it.
By a burst first solar production, and after that collect the investment back with profit.
No risk and this also avoid that the oil will rise to high, and to bring al that dollars abroad by purchase oil, this also triggers inflation.
Indicated it take only 92 x92 mils of Nevada and plant solar. And this will elektr power the entire US. Source The U.S. Department of Energy.
This can’t put to a stop this has to gain, when world leadership go for green.
Ben
You go ahead and wait another decade.
That'll be too long for many.
Better listen to this analyst,
it happened twice before during the last 8 months.
When shares fall, it's like rocks from the sky !!
Governments around the world on the brink of depression aren't going to be willing to throw billions on solar energy like they WERE going to do before this financial crisis hit, which is why I'm weary of investing in solar energy right now. Solar is only desirable when governments subsidize the hell out of it.
If every home in America had a solar panel on it, we'd still need 90% of our power from other sources.
> I would love it if solar power were as effective as everyone wants
> it to be, but it's really more of a luxury novelty than a cost effective
> source for energy.
Alfredo, I understand your concerns, but one of the main goals of the subsidy programs (the German one being the best example) is to help subsidize the expansion and improvement of the solar industry until economies of scale allow it to break even with fossil fuels.
> If every home in America had a solar panel on it, we'd still need
> 90% of our power from other sources.
Actually, if you can fit a 4 kW system on a rooftop (which takes up 200-300 sq. ft.), that can supply an average household's energy needs. Of course you'd need a lot of additional generating capacity for industrial and residential buildings, as well as transportation, but it's not fair to put the entire burden of energy generation on rooftop PV -- that's like asking for hydroelectric-powered cars.
Many new energy technologies will need to be developed over the next few decades, and in my view, solar PV will be part, but not all, of the solution.
It is possible to rethink the massive Russian Stove with circulating solar hot water. Germany has homes that almost heat themselves with heat exchanger technology and super insulation. This is not Star Wars. It is all here today.
I pass an Amish farm and it has a wind turbine on the roof of the main house and it is always spinning. People living on boats have no trouble at all meeting their energy needs. A gas/diesel generator is supplemental. We need better batteries and we are home free. Someone will get a wrecked Prius and drive a boat with the parts.
The problem is no storage method for AC power. Power companies produce for the peak demand hour, 24 hours day. It can take days to bring a large generator on line. There is massive power wasted every day.
About 15 yrs ago power companies in North America formed one large grid, so they could share excess power and shut down their peaking generators (95% wasted power). Today manufacturers will chill water at night for their air conditioning at the POWER COMPANY's request.
Peak power consumption is one hour of the day (if that), the rest is very wasteful. Solar and wind?......... Sunny and windy days are completely inconsistent........... so we still need a way to store AC power!
Which is where the focus should have been from the very start.
How is that useful? There is no way to store AC power which is the real problem. So on a cloudy or calm day....we just shut America down? We can not store the power for when we need it.
24 hrs a day the power companies produce for peak hour demand, because there is no way to store AC power. So we have a horrendous amount of excess power produced every day.
Very expensive, poor performing solar panels made with toxic materials, when we will just have to learn to do what we should have done in the first place. Store AC power!
Chill water at night so you do not need power for air conditioning during the day. Use wave currents to raise ocean water and dump it back in through generators during that ONE peak demand hour every day.
Compared to the solar idea, we might as well build a moon base!
On Apr 04 01:02 PM Peter Bermel wrote:
> On Apr 04 12:52 PM Alfredo Martinez wrote:
My little 3kw rooftop solar system has been cranking out about 4,500 kwh/yr (it was installed about 3 years ago), so I save about $1,800/yr (half tier 5, half tier 4). Today's cost (I paid a bit more) for that system is about $10,000 (after the CA rebate and federal tax incentive). That's less than a 6 year simple payback, and a cash on cash return of 18%.
Most solar panels systems for the home are 1 KwH systems (at peak when the sun's at the perfect angle and there are no clouds), and cost around $10,000. One kilowatt-hour (kWh) equals the amount of electricity needed to burn one 100 watt light bulb for 10 hours.
Do the math, does that sound like it can provide enough electricity to power all your appliances, air conditioner, heater, refrigerator, stove, oven, hot water heater, television, etc? Of course not.
The solar industry was banking on gullible governments to subsidize their operations, and the money is simply no longer there, which means their stocks are ridiculously overpriced, just like their products.
On Apr 04 01:02 PM Peter Bermel wrote:
> On Apr 04 12:52 PM Alfredo Martinez wrote:
source: Sankei Shimbun Japan daily:
'Japan to include 2 trillion yen -20 billion $- in spending to mount solar panels on public buildings as part of a stimulus package to be announced in april.'
Because the company concerned refused to make provision under the OZ EPA guidelines regarding worker safety etc it was easier to go where 'consideration' speaks louder than words ....
But I have never been convinced that initial cost of installation and inconvenience /danger of low power and toxic battery cells in the home are obstacles that have been overcome. The government subsidies required to overcome those obstacles with a cash splash further reinforces my scepticism .
So are the shares really worth the amounts stated? and are traders simply attempting to milk a cash cow?
States like California that are completely bankrupt and are sending out IOU's are going to have to rethink their financial priorities about subsidizing solar panels for wealthy homeowners.
Once you strip away government subsidies, solar generated electricity can't stand on its own two legs.
On Apr 04 03:11 PM rooferguy wrote:
> Whoever says that "solar is not cost effective" must live in a state
> where electricity is really cheap or there are no solar incentives.
> Here in northern California our darling utility just raised the top
> tier rates to 44 cents/kwh (4th tier is 38 cents and third tier is
> 26 cents).
>
> My little 3kw rooftop solar system has been cranking out about 4,500
> kwh/yr (it was installed about 3 years ago), so I save about $1,800/yr
> (half tier 5, half tier 4). Today's cost (I paid a bit more) for
> that system is about $10,000 (after the CA rebate and federal tax
> incentive). That's less than a 6 year simple payback, and a cash
> on cash return of 18%.
On Apr 04 08:57 AM jbde wrote:
> Check your math - "STP almost 300% from 5 to 14" - might as well
> be almost 2300% - the correct figure based on the prices you cite
> is 180% that would be (14-5) / 5
>
> LDK would be 81.3% not 70% so why not round to 80% instead of 70%
>
>
> If the facts are wrong, then the conclusions are too!
Solar is NOT cost effective. Out here where I live in West Virginia we have almost exclusively coal fired electricity and it's dirt cheap. Residential rates run on average about 8-10 cents/kwh. The rates for commercial are higher, and we pay about 12-13cents/kwh at our business location. There is currently no state subsidy or tax breaks for solar and no chance there will be one in the near future - they only passed a net metering law here about 5 years ago. With only the tiny federal tax break, your 3kw system (we would actually need about 5-5.5kw to power our house) would cost about $30,000 to install here, and would probably generate less than $600 to $800 worth of electricity annually at current prices.
We have a 5,400 sqr foot all electric house (no lp or propane at all) , and our electric bills average a meager $320 / month. Even if cap and trade was passed and our electric bill doubled, we're still light years from being able to having cost effective solar options in this area. What we'll need are PV's that cost around $1/watt, not $5/watt like they do now. Looking forward 10-15 years I imagine the solar companies that will ultimately make it are the ones that will either introduce incredible technological advances, or create processes where they can profitability manufacture current PV technology at 1/5th the cost now. How you could choose which companies those will be today I have no idea. Any solar holdings you have now will constantly be exposed to technical innovations by competitors that will render current technologies obsolete, not to mention break troughs in other areas outside of solar (picture the "Mr. Fusion" from the Back the Future movie for a little levity). The majority of solar companies out there now probably won't exist in ten years, so successfully investing in solar will prove harder than many people think.
On Apr 04 03:11 PM rooferguy wrote:
> Whoever says that "solar is not cost effective" must live in a state
> where electricity is really cheap or there are no solar incentives.
> Here in northern California our darling utility just raised the top
> tier rates to 44 cents/kwh (4th tier is 38 cents and third tier is
> 26 cents).
>
> My little 3kw rooftop solar system has been cranking out about 4,500
> kwh/yr (it was installed about 3 years ago), so I save about $1,800/yr
> (half tier 5, half tier 4). Today's cost (I paid a bit more) for
> that system is about $10,000 (after the CA rebate and federal tax
> incentive). That's less than a 6 year simple payback, and a cash
> on cash return of 18%.
And even when the household doesn’t need power, it transmit power to the network.
and let spin your used Kw backwards,
When the price of Solar get cheaper The downward move in retail prices of last years and months, so more demand for them.
Also the calculation from current solar installation’s is not update due to better effective of current panels and price.
Here in Holland on the 6- April (monday) the government policy again will lift this technology. Due to EU agreements for green.
Older installation had a pay back of 15 till 20 years, current day’s it 5 years even in Holland with our cloudy weather.(there go’s the luxury novelty market and start the real market )
And about the toxic waste that’s going down in the current evolution solar.
Also you can collect the older decrease panels and dismantle them as we do with car’s over here.
Past year I travelled to China 4 times and all over the China
the house have that water sun boiler.
When they gone install PV solar panels the same way its massif.
You told the truth. Thank you.
You are right, California is being controlled by a bunch of pro-spending politicians who keep inventing new welfare ideas,
Even the TERMINATOR feels helpless.
It's a sad State.
high for the last 15 years, but the profit margins on the companies in oil exploration/distribution business were less than impressive all this years (with the exception of couple of years). The supply of PV product today is definitely outpaces demand and this trend is growing. Don't forget that at least 50% of the demand comes from developing countries and another 50% from Europe. Neither group
has subsidy money available today, and this situation is not going to change for years.
On Apr 03 11:53 AM SolarGuru wrote:
> One of the reasons that Japan kicked our butt in the automobile industry
> (and others) is that, wisely, their investments are not geared quarter-to-quarter.
> They set long-term goals and achieve them. Today, the same can be
> said for the solar industry. True, not all the Chinese solar companies
> will survive. But the few that will, will become the next decade's
> Microsoft.Demand for clean energy will not wane any time soon.
$0.69/kW should have been $0.69/watt, which typo aside, is a recipe for losing money in the absence of subsidies.
$8 is 60% more than $5, not 180%. An investment going from $5 to $14 is a 180% return.
As far as the solar sector goes, although solar energy has no direct economic relationship to oil, solar stocks seem to move in lockstep with the price of oil. My opinion is that solar stock prices also are driven by equity speculators, so as the equity market as a whole rebounds I expect solar will as well (unless oil craters).
For all novices to investing: You are better recieving "news" from briefing.com instead of this kind of prediction nonsense. these guys are rampant on Alpha and they will lose you loads of money.