The current regrettable financial crisis in the U.S. has completely blinded investors to the importance of solar energy in resolving our energy dependence a year from now. Investors have fled the sector in droves, driving some of the stocks down to IPO lows.
We’ve had two sequential 7 year economic bubbles - the first nurtured by the incarnate bubbleonian himself (Alan Greenspan) and the second one (real estate) abetted by Greenspan to cover up for his Fed policy in the first. In his day, Alan Greenspan was hailed as the King Midas of the United States financial system. But I think it came with a twist - everything he touched turned to debt instead of gold. It's no accident that gold began its historic run just after he left office.
Greenspan kept negative interest rates afoot for far too long in 2003 and 2004, nurturing a mortgage industry that expanded three deviations above the historical norm in 2005-06. It will take a home-price drop to the level of 2000 before homes are once again priced along the trajectory of median income. For all my criticisms of Mr. Bernanke, he inherited a disaster waiting-to-happen from Sir Alan. And to his credit, he has been creative in his efforts to posit a solution for the financial crisis short of taking the whole thing on himself. I'm not sure why he delayed so long, because his boldness in 2002 helped the American economy out of the first jam, but at least he is taking action.
Wall Street has always averred that the best government is one of gridlock - unable to "mess" with it. But the last 10 years of legislators could best be described as "activist ignoramuses". The mess we are in today is a direct result of Alan Greenspan's Fed encouraging the repeal of the Glass-Steagall Act. Here is a link to the sordid history of that event - Wall street financial companies spent $300ML and 20 years of time to get it repealed.
Senator Carter Glass was a former Treasury secretary, the founder of the U.S. Federal Reserve System, and the primary force behind the Glass-Steagall Act. Henry Bascom Steagall was a House of Representatives member and the chairman of the House Banking and Currency Committee. Both of these men knew what they were doing when they wrote this important piece of legislation - a bill that could prevent the United States from falling into another depression at the hands of Wall Street stock and real estate speculators (which is exactly what we have today). Steagall agreed to support the act with Glass after an amendment was added permitting bank deposit insurance (this was the first time it was allowed).
Back to solar energy. As I have said in previous articles, once a process of solar epigenesis is embraced on a national level, the investment premise will be similar to the former "next new things" in technology that preceded it - computers, networking, the Internet, and cell phones.
New applications of electricity generation will seep into every aspect of energy production - and with them - new inventions and new uses for them. The main thing is the adoption of the "first principle", and from that, the subsequent categories will naturally develop. If you look carefully at the expensive technology (and investment capital) needed to extract fossil fuels from 5 miles under the earth or ocean, and compare that with the technology needed to extract electricity from the sun, you can see that the main debate is levels of cost-efficiency ($) for creating power.
Here's some examples.
- Lighting (lumens) accounts for 20% of all elecricity-usage in the United States. LEDs can now produce the same level of lumens and at better quality (because you can "adjust" or tinker with every level of the color spectrum digitally) at 1/100 the cost of electricity required by our current lighting fixtures (incandescent and fluorescents).
- Pumping water for agriculture accounts for 20% of the cost of electricity in major farming states. Farming is synonymous with sunlight. There are diesel-solar engines in development that can power irrigation systems directly from the fields themselves.
- The average American drives no more than 80 miles a day back and forth to work, and most cars never go more than 200 miles/day. Electrical cars within that range can be powered from rooftop solar-generating systems at home (plug and play) - and at work - which will assist the grid in providing electricity for transportation. The benefits in greenhouse gas reduction and the elimination of transportation fuel expense are obvious.
- Air conditioning to cool homes and for food preservation in the sunbelt of the United States comes at an enormous cost. What kind of cost reduction is possible when 75 million refrigerators, stoves, and air conditioning units are powered by a home-installed solar grid instead of a natural gas fired power plant? And further, what kind of reduction in business costs occurs when several million square miles of warehouse roofs are covered with solar energy materials?
These are just a few examples, but solar energy - like the Internet before it - is a grid-based (networked) application and inherently deflationary [progressively producing more output at less cost ($)]. Just as the Internet created greater access to data and information for individuals, solar energy creates energy independence with an easy-to-do expansion of our existing infrastructure to accommodate it.
I think the United States is in the right psychological place at the right time with the right technology (and the right geography) to revolutionize its energy-production if public policy and public opinion can embrace it.
For investors trapped within our current negativity bubble, take a look at the recent earnings of this European solar equipment maker, Roth & Rau, and take heart.
