SunPower Corp. and the Burgeoning Global Solar Industry

The stocklore says that Bernard Baruch knew it was time to sell his stocks when his shoe shiner gave him a stock tip. Baruch's judgment involved taking several market inputs and piecing them together to arrive at a conclusion. Sophisticated investors call this the 'Mosaic theory'. We can use the same methodology and gather different clues that can then be put together to finally crack the jigsaw.

We came across several clues this past week about one of the most promising sectors. We invite the reader to piece together the jigsaw.

1. A Business of Green blog published in International Herald Tribune this past week writes about a discussion with Rajendra Pachauri, Chairman, Intergovernmental Panel on Climate Change. Libby Rosenthal, the blog author, quotes Pachauri as saying that we only have "2 to 3 years to act or we will not be able to reverse this disastrous trend" of global warming. We need to look at this in the context of a comment made by Dr James E Hansen almost two years ago when he said that we have 10 years before we reach a tipping point from where the global warming process becomes irreversible. Does this mean that we haven't done much in these two years, which forces Pachauri to forecast a much more ominous time schedule?

2. On December 4, the US Air Force announced the completion of the first phase of its Nellis Air Force Base solar farm in Nevada. The power system, consisting of approximately 70,000 solar panels, is expected to produce 15MW and will be the largest in N. America. This otherwise staid development is remarkable as it coincided with the initial steps towards stricter environmental regulatory norms that are on the anvil in the US.

3. This past week also witnessed a series of legislative initiatives that could eventually cut back the catastrophic free lunch programme that has been historically offered to industry. On December 5, the Senate Committee on Environment and Public Works approved the bipartisan climate change legislation - the Climate Security Act of 2007 - to the Senate floor. This legislation could cut US greenhouse gases by 70% by 2050. On December 6, the US House of Representatives passed the energy bill (Energy Independence and Security Act) that imposes $13 Bn as taxes for oil companies along with a requirement for utilities to generate 15% of their energy from renewable sources like windmills and solar panels by 2022. The money generated as taxes from oil companies would then be used for developing renewable energy sources.

4. The United Nations Climate Change Conference began this past week in Bali, Indonesia, to negotiate on a successor to the Kyoto Protocol. In the conference, Kevin Rudd, the Australian Prime Minister, announced his country's ratification of the Kyoto Protocol, thereby intensifying pressure on the Bush government to follow suit.

Any guesses on who built the solar panels at Nellis Air Force Base?

It is SunPower Corporation (NASDAQ: SPWR), whose stock has gained almost 230% in one year. Is the stock overvalued? Hard to judge... but what we do know is that there is a robust pipeline of growth opportunities for the entire solar industry over the next couple of years and SPWR is the frontrunner in that race.

Comments

[alpha24seven:]

Overcapacity and diminishing subsidies = implosion. This industry is headed down. It is a bubble of dot com proportions. This is a good thing because the remaining industry will be built on strength and not air as it currently is an solar 2.0 will kick ass.

2007 Dec 10 03:48 PM

[jmmx:]

THE REPUBLICANS ARE WH0RES TO THE OIL INDUSTRY

From NY Times

WASHINGTON — Pared-down energy legislation cleared the Senate on Thursday by a wide margin after the oil industry and utilities succeeded in stripping out provisions that would have cost them billions of dollars.

The legislation still contains a landmark increase in fuel-economy standards for vehicles and a huge boost for alternative fuels. But a $13 billion tax increase on oil companies and a requirement that utilities nationwide produce 15 percent of their electricity from renewable sources were left on the floor to secure Republican votes for the package.

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To hell with global warming - the poor oil companies need charity from the american people in order to survive!!!!

The republicans continue to give liberal handouts of taxpayer $$$ to the oil companies which are making record profits!

DISGUSTING!!!!

2007 Dec 14 01:48 PM