The Economy Is the Least Important Factor Affecting the Solar Energy Industry

Fellow The Panelist contibutor Eben Esterhuizen asks and clearly answers "no" to the question, "Will Recession Lead to A Solar Depression? " To take Eben's analysis a little further, I thought I'd delineate the factors that do affect the solar industry. Every investor should have an opinion about this list before throwing money after lofty hopes for a clean energy revolution.

Factors affecting the viability of the solar energy industry (in order of importance):

1. Government subsidy/incentives.
2. The amount of sunlight hitting the earth.
3. Technological innovation in solar energy conversion.
4. Energy Prices in this order (gas, coal, oil).
5. Economic Activity (or lack thereof in a recession).

The efficiency of current solar technology is getting better all the time, but still depends mostly (but not entirely) on government incentives. An engineer friend assures me that the technology behind solar panels that convert sunlight into electricity will reach the point where solar energy is a viable competing energy source at some point in the not too far off future, however today government subsidies and people putting up solar panels for non-economic reasons still means that solar is not an efficient mass energy source. If you live in the desert and electricity is very expensive or diesel-generated, on-site solar makes sense without subsidy. My point? Make sure you believe (as I do) that government subsidies (and incentives like carbon caps) for solar energy will continue and increase around the world before you buy solar energy stocks for the long term.