Post-Solyndra, Clean Tech Is Alive And Growing

by: Brett Korsgaard

It is unfortunate that the politically charged Solyndra affair seems to have cast a pall over the entire clean tech industry. Beneath the headlines however, it seems to me the stealth boom in clean tech continues unabated. Fully $7 billion in venture funding has been committed to clean tech investing thus far in 2011. While crashing PV prices may be markedly impacting the efficacy of US solar companies in their current form, what rarely gets reported is the 70% increase in US installations for solar projects for consumer and commercial applications.

The inability of the federal government to put a tax or “cap” on the true price of carbon emissions is not stopping the states, counties, cities and other local entities and businesses from co-opting energy derived from sustainable sources. One example of this: The state of California, for all its travails, did manage to enact a cap and trade agreement that puts a price on carbon and will usher in greater adoption of renewable energy.

An effective “end run” on Washington can provide a more resilient, reliable future that avoids the volatility of gas and oil prices. This distributed renewable future serves to act as a “free gas price hedge.” When oil prices spike again (and they will, given inevitable supply shocks coupled with demand from the developing world) at least some will take advantage of this sustainable hedge.

Clear-thinking businesses, municipalities, local governments and consumers who are making the investment in a greener future not just to reduce their carbon footprints but because of basic economics: There is serious money to be saved by formulating and executing a plan that involves co-opting renewables. That stubborn 7 to 9 year ROI calculation for investment in solar is getting a makeover: 3 to 5 years is now possible in many instances given the changing dynamics of the industry and vastly lower price solar panels.

The service providers that install finance and conceive of the business plans regarding solar are packaging and selling power in novel ways that make it irresistible to consumers and businesses. How about power purchase agreements (PPAs) that provide for lower monthly payments for energy upon immediate installation of a system with no out of pocket costs? That is not a hard sell, and it is possible now.

Not all solar companies are getting hurt by plummeting PV prices, while this year has been a disaster for the likes of First Solar, Sun Power, Trina Solar et al, the drop in prices has created incredible demand for service providers such as Solar City and SunRun. In the long run a much lower cost structure should raise all boats, and even the beleaguered first-tier solar manufactures will find a point at which they get the economics right involved in producing panels profitably. Economies of scale will kick in with almost limitless demand for solar as it gets closer to grid parity.

What does this mean to consumers and investors? Clean tech has become too indispensable to a diverse set of stakeholders, which includes governments, large corporations and a huge segment of the population which stands to benefit from alternatives to a monolithic carbon based future. Contrary to the naysayers, who point to Solyndra with exhortations of “I told you so,” the industry is building a foundation for growth that may be the lead story for the current century in which we live.

The best way to get exposure to the multifaceted industry is to get representation through a portfolio that encompasses the market leaders in the segments clean tech comprises: solar, biofuels, wind and companies directly or indirectly exposed to the nascent EV (the electric vehicle industry). I have chosen a handful of the market leaders in each category. This is a good basis for further research, and most of these issues have underperformed the market substantially this year. Prices and expectations are currently low, but the clean tech industry is really just getting started.

Solar Biofuels Wind Electric Vehicles
First Solar (NASDAQ:FSLR) Amyris (NASDAQ:AMRS) Vestas (VWS.CO), (OTCPK:VWDRY) Tesla Motors (NASDAQ:TSLA)
Sunpower (SPWRA, (SPWRB) Solazyme (SZYM) Suzlon (SUZLON.NS) (SUZLON.BO) Fisker Automotive (private)
Trina Solar (NYSE:TSL) KiOR(NASDAQ:KIOR) Gamesa (GAM.MC) A123 (AONE)

Disclosure: I am long TSL, AONE, VWDRY.PK.