There was a time, a few years back, when anyone who talked about prospects of solar energy were dismissed as cult followers. In 2005, however, Cypress Semiconductor (CY) famously spun off its solar business, Sunpower (SPWR), which has seen its stock almost triple in value since 2005. That move caused a lot of investors to look at solar energy seriously for the first time. I was one of them, having followed SunTech Power (STP) very keenly over the last year.
Suntech Power engages in the design, development, manufacture, and marketing of photovoltaic [PV] cells and modules. It also provides PV system integration services in China. The company's products are used in various residential, commercial, industrial, and public utility applications for on-grid electricity generation, as well as for off-grid use, such as stand-alone lighting for street lamps, garden lamps, telecommunications relay stations, and mobile phone networks. It sells its products to solar distributors, engineering and design firms, and other energy product distributors, as well as installers, system integrators, property developers, and value-added resellers.
At the risk of sounding like a cult follower of solar energy, let me briefly explain why I think solar energy is really the future. In an interview with Dr. Shi [CEO and founder of Suntech], renowned writer Thomas Friedman noticed that when he looked out of Dr. Shi's office in a skyscraper, he could see nothing save the smog and pollution that covered the skies. China is in a condition where it is becoming painfully obvious that alternative energy is not an option, it's a necessity.
Suntech saw the opportunity long ago, and has done a great job taking the lead in solar power. It already controls a major share of the PV cell market in China and is slowly becoming the major supplier in European countries as well. Unfortunately, the US has not been as aggressive as should be, and that when solar power does get to that point where it is a really price competitive form of power generation we may be importing our solar cells from China.
There are a couple of reasons why I prefer Suntech Power right now:
1. The 2008 Beijing Olympics: China's Xinhua news agency reported last Thursday that solar power will be widely applied during the 2008 Beijing Olympic Games. Li Zhonghai, senior official with the China Association for Standardization said about 90 percent of all the hot water used in the Olympic village will be solar heated, and 80 to 90 percent of street lights around the Olympic venues will also be solar powered. Li, who is also the member of the National Committee of the Chinese People's Political Consultative Conference [CPPCC] said about 40 million Chinese households, or 150 million Chinese people, now use solar energy in their daily lives.
2. According to the People's Daily, China is the world's biggest user of solar water heating. So we have a country with more than a billion people switching to solar energy on a large scale, not as a fad or an experiment.
There are other ways to invest in solar energy, like JA Solar (JASO), but I prefer the most stable and credible of those. JA Solar recently had its contract terminated by Sunpower, due to quality issues.
Other such solar companies, including First Solar (FSLR), Evergreen Solar (ESLR) and of course, SunPower Tech (SPWR), are also options for investment in this space, but I prefer Suntech because it actually provides PhotoVoltaic cells to many of these companies, and therefore its a much more stable play.
In addition to that, I am not entirely convinced that the US will take meaningful steps towards switching to solar energy The energy lobby is a highly powerful one in the US and it will take some time for the grim realities to hit hard and cause a major overhaul of our energy policy. So, I prefer STP which gets most of its business from China and Europe.
Disclosure: Author has a long position in STP