Solar Heats Up with Help from China and California

Governor Arnold Schwarzenegger approved a new subsidy for solar power on Monday and joined forces with the federal government to fast-track renewable energy projects. This is on top of current solar incentives, hence it is huge for the industry. California support on solar energy has drawn many companies open office in the state.

Solarfun (SOLF) opened Solarfun USA in Southern California city Torrance, expecting to get a piece of the pie in the world's eighth economy, the company already raised Q3 shipment to exceed 100MW. Trina Solar (TSL) also sees module demand picking up, and the company opened US office earlier this year. Schwarzenegger also signed an agreement with the U.S. Department of the Interior on Monday to speed development of up to 7,000 megawatts of large-scale renewable energy projects.

In the PV market, China's domestic demand is not on wall street's radar yet, at least for analysts from research firms like Raymond James and others. However, the demand is picking up at faster pace than you think, according to Best Solar's Peng Xiaofeng at the 2009 Taiwan International Photovoltaic Forum & Exhibition, Best Solar is projecting 1GW demand in China and 10GW worldwide in 2010. Some Chinese solar names are seeing demand picking up in the Chinese market. Solarfun Power is seeing higher demand well into 2010, this reflected high demand from the Chinese market. Trina Solar also forecasted high demand in the coming quarters; its domestic and US markets are picking up quickly, and the worst of the solar industry is behind us according to CEO Jifan. Good quarters are expected in Q3 and Q4 for these two companies while wall street earning estimates are still low. This may mark the turning point for solar stock prices.

On the other hand, a proposal of adding renewable energy into the nation's eleventh five-year strategic plan is underway, and it is expected to pass by the congress later this year before the Copenhagen meeting. China is trying to achieve 290GW of renewable energy by 2020 according to China's renewable energy report.

The following companies will be benefiting from China's energy embition:

First Soalr (FSLR), General Electric (GE), Trina Solar, Solarfun Power, Suntech Power (STP), JA Solar (JASO), Renesola (SOL), Yingli Green (YGE).

Disclosure: Author is long FSLR, TSL, SOLF, JASO and GE

Comments

[Ben Gee:]

Renewable energy will be the energy for the future. Companies started first will have an advantage. In a few years, the industry will be crowded. Trying to get in then will be difficult or maybe imposible.

Oct 13 11:15 AM

[Troy Jensen:]

Renewable Energy will very much be a PART of the energy mix for the the future, I agree and my company is part of the oncoming GreenTech revolution. I also agree that many of the companies gaining the all-important first-to-market advantage will be important leaders in the future. But as a veteran of the digital rise from 1994 onward, I also know many there will be just as many companies across the landscape that are leaders today in GreenTech that will be in ashes - and it all happens at light-speed in the technology space (think Compuserve, AOL, Ask Jeeves, etc etc - all once were powers to behold, now are distant memories). It's CRITICAL to consider all factors when analyzing this fragmented, changing GreenTech industry. Seeing around the curve is very important: keeping a firm grasp on the macro-environment is crucial when determining what technologies/companies to hitch your wagon to throughout the GreenTech micro-verticals (Clean Energy, Smart Grid technologies, government factors, economic factors, infrastructure requirements, etc).

Just some advice from an old Internet veteran gearing up for the next technology revolution!

Oct 13 01:47 PM

[Road Runner:]

I agree with the author that the increase in solar demand is not being detected by Wall Street. It seems like the word "solar" is still a bad name on Wall Street. It seems to me that sometime between now and the end of 2010 this will change making "solar" a good name on Wall Street.

Don't forget that Wall Street types run in herds because they have their image to protect. That's why there is so much "window-dressing" going on at the end of quarters and especially at the end of the year. They have to show that they owned the "right" stocks during the previous period. Right now "solar" seems to be the wrong stocks to own except for FSLR, and maybe TSL and YGE.

I think this is a good time to buy solar stocks, but I would pick the established silicon based solar companies like SPWRA, STP, TSL, YGE, etc. I think thin-film solar companies like FSLR are not the best investment because efficiencies is so low and installation labor costs are 35% or more of the total home solar system cost.

I also believe that it is too late for any new companies in the solar sector. To be a strong solar company they have to be much more than a good solar module maker. They have to have a strong supply and/or distribution chain. And, they have to have good installation technology to decrease the installation labor cost.

I own SPWRA, STP, and TSL.

Oct 13 01:57 PM