Solar bears love to say that solar can't make it without subsidies, while at the same time bemoaning falling prices as indicating solar is unprofitable.
Imagine that. A potential 8.6 GWatts of power supply sitting on shelves, waiting to be installed.
This is terrible financial news for companies like Wacker Chemie (WKCMF.PK) and SolarWorld AG (SPWRF.PK) of Germany, as well as MEMC (WFR) and privately-held Hemlock Semiconductor of the U.S.
But it's also great news for buyers, and in the long run it does not mean that Chinese companies have the solar market sewed-up.
That's because, unlike the semiconductor technology on which it's based, the nature of solar technology is changing rapidly. The largest U.S. producer of solar product, First Solar (FSLR), doesn't even base its product on polysilicon but on cadmium telluride. Other American companies, like Konarka, are making solar panels out of plastic.
What's happening is again similar to what happened in computing 40 years ago. IBM mainframe prices were pushed downward by competition from “plug-compatible” companies, but these companies were in the middle of being replaced by mini-computers, which were ultimately replaced by PCs. A company that overproduced in one technology could deliver real bargains to customers, but the next generation of technology made those bargains look like expensive mistakes.
We don't know the final form solar technology will take. We do know that we have many generations to go, with lower-and-lower costs, before we reach that final form.
But the solar bears can't have it both ways. You can't say both “you wouldn't exist without subsidy” and “you're too expensive” when prices are falling below other forms of energy, and technology is changing to assure they will fall further still.
Fact is every important technology gets government subsidies as it's ramping up. Chips and the Internet were products of the Cold War. In time, both paid off big, in terms of economic abundance, because innovators were able to keep driving prices down, investing ahead of demand.
Why should solar be any different?
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.