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The Guggenheim Solar ETF (NYSEARCA:TAN), tries to act as a proxy for solar power suppliers and markets. Practically since its launch in 2008, TAN has been burning investors. It once traded at near $30/share. It now trades at under $6.

I'm not going to make a bullish case for the fund here, although there are folks who will do so. Instead I'm going to tell you it doesn't matter.

It's still 1971 in the solar power sector. The industry's equivalent of a PC hasn't been invented yet. We're not even certain what a chip looks like. The most popular format is the equivalent of a mini-computer, a huge slab of polysilicon that costs tens of thousands of dollars, installed.

The investment can be worth it. Companies that bought IBM S/360 mainframes in the late 1960s and DEC PDP-8s were certainly satisfied, even though those machines were jokes compared to what you can put in your pocket today.

A polysilicon panel system can, with proper maintenance, last long enough to pay for itself in electricity, if you assume a blended price for that electricity that rises over time. It's a capital expense, one that can get a return, but one whose market is driven by government's willingness to subsidize that expense against tomorrow's prices.

This won't remain the case. There are tremendous companies being funded by venture capital right now that are delivering more efficiency, lower costs and better support infrastructure. But most will fail. That's how it is with venture-funded companies.

Some, however, will succeed. And they will be joined by other companies, coming out of what's now going on in the laboratories of MIT, Georgia Tech, Rice University, Stanford, and 100 other colleges, not to mention entrepreneurial garages that make those Bill Hewlett and Steve Jobs once toiled in look plush.

My guess is that, within five years, you'll see Building Integrated Photo Voltaics (BIPV) systems, based on plastics or printed, at Home Depot (NYSE:HD) and Lowe's (NYSE:LOW). You'll see high-temperature superconductors going into long-distance power lines; you'll see better power converters and inverters, and you'll start to see developers building huge solar canopies over their parking lots, turning today's heat sinks into shaded walkways and power plants.

But it's still 1971. Right now the big profits are made among channel companies that finance installations. Tom Konrad of AltEnergyStocks has a great list of the present players, but the big profits today are in the financing area, in outfits like SunRun that aren't public yet.

TAN is a bad investment because TAN doesn't have access to the good investments. The only solar companies that are publicly traded are those which need capital, mostly market laggards or folks who've failed to interest a VC in their schemes. But wait. That will change.

Source: The Trouble With TAN