Here Comes the Sun: EMCORE Should Prove Profitable

Mar.12.08 | About: EMCORE Corporation (EMKR)

One of the hottest technologies in solar today is concentrator photovoltaics, or CPV. Flat-plate PV photovoltaics, which produces electricity by having sunlight directly strike panels made of expensive silicon wafers, has dominated the market.

Over the last few years, several companies and technologies have come forward, each having a favorite cost metric claiming to be the lowest manufacturing cost per watt. The goal is to make solar as inexpensive as possible, or equally cost per kilowatt-hour on par with fossil fuel-derived electricity. There are many opinions on how to achieve low costs and the production processes open multiple avenues for innovation. One such company that has been in that business for years and is currently flying under the radar is EMCORE (NASDAQ:EMKR).

Emcore's industry leading multi-junction solar cells enable a new class of high power communications satellite for direct to home broadcasts and advanced satellite services. These advanced solar cells have also been adapted for use in terrestrial concentrator applications and have attained conversion efficiencies in excess of 37%. These products will make possible cost competitive concentrating photovoltaic systems for use in utility scale solar power stations and other distributed energy applications. The company is using its space expertise in developing terrestrial solar products.

What sets the company ahead of the silicon-based competitors is its use of compound semiconductor materials that enable it to develop highly efficient cells. With multiple absorptive layers, these multi-junction cells take in a lot more sunlight than traditional solar cells. EMCORE's use of gallium arsenide (GaAs) cells is cost effective as compared to the high-demand shortage of silicon. Taking advantage of their satellite business and 40% efficiency in solar concentrator will prove to be profitable.

Concentrated solar power is undergoing a renaissance, not only in the U.S. but globally, throughout Europe and the Middle-East. China's need for coal has forced many utilities to use natural gas to power electrical utilities, sending natural gas prices higher. CSP is well-positioned to compete against other electricity generation technologies as technology continues to improve.

In the last quarter, EMCORE signed a memorandum of understanding with SunPeak Solar LLC to supply between 200 and 700 megawatts of solar power systems for deployment in the southwestern region of the United States. It was awarded several contracts to supply the Spanish market solar CPV components and several 60 megawatt systems to be deployed in Ontario, Canada over the next three-years. According to a recent study from Emerging Energy Research [EER], a leading research and advisory firm analyzing clean and renewable energy, Solar CSP is the fastest growing utility-scale renewable energy alternative after wind power, with up to $20 billion expected to be invested by 2013.

EMCORE's solar CPV is an undiscovered hidden gem; its system leads the industry in terms of sunlight conversion, thanks to proprietary triple-junction solar cells. The demand for alternative energy, especially solar cells, is very robust; solar tax credits will soon be extended, and talk of carbon-credits now popular in Europe will soon come to the U.S. The biggest reason why solar power will ramp up in the next few years is grid parity What used to cost $2 per watt for electricity will soon come down to $0.20; it costs about $0.10 per watt to produce electricity from coal or gas - figure in the tax and carbon credits, and solar is now economically feasible.

Recently, Jeffries & Co issued an upbeat opinion on solar and EMKR with a $20 price target. Oppenheimer is also positive on this company, especially the fiber optics division, and sees a spinoff of the solar division. Smallcap newsletter Ground Floor Stock is recommending the stock in its March issue with some very positive comments.

The stock is now bouncing off of its 200-ma, the oscillators are oversold and the time to buy this stock is now. Emcore should double in a year.

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Disclosure: Author has a long position in EMKR