Further Musings on Solar Stocks

Yesterday, my third article on the solar space appeared on these virtual pages. That article built upon my two previous articles, which offered some forward-looking views on the solar space in general and concluded that Trina Solar (TSL) offered the best risk-reward ratio in this space.

I submitted a table I had put together, which calculated forward PEs for 11 stocks in this space. The table is set out again below (with JA Solar's (JASO) price "% change" corrected after some sharp-eyed contributors found my math error in failing to account for JASO's 3:1 stock split).

The table shows that as of the April 22nd close, three of the solars (LDK Solar (LDK), Solarfun (SOLF) and Akeena Solar (AKNS)) are lower now than they were three months ago, and five have gone up more than 10%. Two are about even money - Suntech Power (STP) and Yingli Green Energy (YGE). [Note: Caution, the solar stocks on the morning of April 23 (the time of writing) were moving around a lot, so some of this may not be accurate by the time you read it today]. The leader has been First Solar (FSLR), which has gone up 74% (from $171 to $298). In second place is Canadian Solar (CSIQ), which increased 41% from $18.56, where I recommended it to $26.14, where it closed yesterday. Third was JASO, with a 28% increase, SunPower (SPWR) went up 23%, and TSL increased 18%.

Because CSIQ has gone up so much, it is no longer as much of a bargain as it was when I recommended it—its 2008 PE has increased from 11 to 15. Because TSL's price hasn't moved as much—despite the fact that earnings estimates for 2008 have increased substantially (from $2.83 to $3.39)—TSL is now the best bargain in this group, sporting a forward (2008) PE of 12.

Other metrics on TSL are also quite compelling—TSL is projected to increase revenues from about $300 million in 2007 to $800 million in 2008, and to more-than-double its earnings from $1.54 in 2007 to $3.39 in 2008. One analyst believes that TSL will make $4.19/share in 2008. Another positive for TSL is that it has secured much of its polysilicon requirements from 2008 til 2015 (TSL has secured 95% of its 2008 requirements). Finally, TSL still has a long way to go to revisit its 52-week high of $73.

One of the reasons that TSL dropped (during the January solar bloodbath) more than some of its peers is because Trina was planning to build its own poly factory at a cost of $1 billion. This was viewed by me (and obviously the market) as a major negative, for three reasons. First, it wasn't clear where TSL was going to get the money to build this poly fab. Therefore, there was the fear of stock dilution or of punishing interest rates in order to get enough cash to build the poly plant. This was one of the reasons I did not like TSL as much as CSIQ the last time around even though the PE for TSL was pretty close to that of CSIQ. My second reason for disliking TSL's foray into poly manufacturing was that it would de-focus management from the main task at hand—making and selling topnotch solar panels at the best price possible. Finally, I was very concerned that by the time that TSL made any poly in that plant (several years from now), poly would be so cheap and so available that TSL's effort would have been for nought—if not worse.

In any case, finally coming to its senses, TSL management announced about two weeks ago that it had canceled the plans to build the poly factory, causing the stock to go up several dollars that day, and over the past two weeks, TSL has established a new base in the low 40s. It should be noted (although I am not positive about this) that the average earnings projection of $3.39/share may be based on estimates that have not been updated since the cancellation of the poly fab. If cancellation of the fab decreases expenditures going forward or enables greater concentration on TSL's main business, there may well be upside to the average earnings projections of $3.39 for 2008.

I still like CSIQ, although it does not offer as good a value as TSL, in my opinion. Its PE is higher than TSL's, while the expected revenue growth of these two companies is almost identical ($300 million in 2007 to $750 million in 2008 for CSIQ). What differentiates these two companies is their gross margins, with TSL's gross margins substantially better than CSIQ's. Although this would normally be viewed as an advantage to TSL, if CSIQ improves its gross margins—which should not be that hard to do—there may be some decent upside to earnings estimates, thus lowering its forward PE closer to TSL's.

Also, CSIQ has been doing some work with UMG silicon, and according to the last conference call, there is about $100 million of upside revenue potential in 2008 if the UMG production pans out as expected. If the UMG silicon production works out, it is likely to push 2008 earnings over $2/share (note that the highest analyst estimate for CSIQ in 2008 is $2.02), putting CSIQ's PE also at 13 (like TSL's). I also like the fact that the market cap of CSIQ, at $700 million is a bit smaller than TSL's, and that only five analysts follow CSIQ versus eight for TSL, giving CSIQ the potential for greater recognition in the marketplace and therefore, greater stock appreciation.

But taking everything into account, I like TSL a little better at a PE of 13 than CSIQ at a PE of 15, but might consider picking up a decent CSIQ position if it became available around $24.

A few other solars merit some discussion. ReneSola (SOL) is a new entrant that just recently IPO'ed, and offers a 2008 PE of 17. But the earnings ramp on SOL (from 86 cents in 2007 to $1.08 in 2008) is not as impressive as TSL's double or CSIQ's 6-fold increase, plus, we know less about this company because it has only been public a very short time. Thus, at a PE of 17, it does not get ahead of TSL or CSIQ, in my view.

SOLF, YGE and JASO trade at PEs of 20-30, and I do not believe offer more compelling values compared to TSL and CSIQ that would justify those higher PEs. If a reader knows of a significant advantage one of these three has over TSL or CSIQ, please comment about it.

In my view, although SPWR is clearly the technology leader in the group today (they are cranking out 22% efficiencies in the lab, and are selling 19.3% efficient panels commercially), its growth rate has definitely decelerated. Indeed, on the conference call last week, SPWR indicated that revenues in Q3 of this year will be flat with Q2. In my view, even given its technological prowess, SPWR is overpriced at a forward PE of 43. In addition, I believe other companies will substantially narrow the efficiency gap in the next year or two (note that STP's Pluto technology is reputed to be achieving production efficiencies of 18-19%).

Suntech Power (STP) is a closer call for me. It has actually done worse since my last article, having dropped from $51.70 on 1-25-08 to $49.18 yesterday. I panned STP in January because I thought it was overpriced at its PE of 31, but I picked up some shares last week at about $45, at a PE of about 28. The reasons for this are as follows: STP's price got nailed recently because of lower than expected revenues, lower margin due to higher silicon cost, some foreign-exchange losses and unexciting 1Q08 guidance that was below 4Q07 actual revenues.

These negatives have been baked into the current price, and to the extent that STP will report better than expected, it should have room to run up given that it is still trading at ½ of its 52-week high. The question is, what is the likelihood that STP will report better than expected?

I think there is a decent chance of that. So far, companies that have reported have reported higher ASP's than most analysts have modeled. Since every penny of additional ASP goes to the bottom line, the small 20-cent-per-watt ASP increase can have a significant impact on the bottom line. Second, recent market events seem to suggest that the poly situation (which really hurt STP's margins in 4Q07) has improved, which should aid STP's margins. Third, foreign-exchange losses of $6 million should be easily reduced by simple hedging. Next, STP is the biggest solar PV producer in the world, which ought to give it a decent leg up on its competition in this business where scale is a significant advantage.

Next, STP has a couple of products that may give it a competitive advantage—Andalay, which it has licensed from AKNS, and which reportedly is a slick and inexpensive way to install solar panels, and building-integrated PV [BIPV], where actual building structures (actual roof, walls, etc) make electricity. Therefore, I think STP is a buy in the low-to-mid 40s.

Finally, STP announced Tuesday that it has opened up offices in Australia, a market that I believe will generate significant solar PV demand for STP. STP's CEO attended university in Australia, and of course, Australia and China do a lot of business already.

I will close by discussing FSLR, whose prospects I didn't like in January, and which I like even less now. I say that despite acknowledging that with a 74% increase, FSLR outperformed all the other solars, by far, including CSIQ, in the last 3 months (but then again, the million-dollar houses in California also went up every month until they started crashing in 2007). Although the consensus earnings for FSLR in 2008 is $2.49, even at $3, FSLR is trading at a forward PE of about 100. For any company to justify that sort of PE, it has to be able to more than double its earnings on an annual basis for several years into the future, usually because it has a proprietary product or service for which there is no meaningful competition (think Microsoft (MSFT) OS in the distant past, although even in those days, I don't think MSFT garnered forward PEs of 100)).

One stumble and all of a sudden, FSLR no longer merits a PE of 100, and contraction of the multiple kills the stock price. One need not look far to find examples of this—look at STP and SPWR, both of which are trading at about half of their 52-week highs (Apple (AAPL) and Google (GOOG) are two more examples of fabulous companies who got knocked down because they failed to meet continuing outrageous expectations—and they "only" trade at forward PEs of 30 or 40).

Stocks like FSLR remind me of a Ponzi scheme or of our housing bubble—the only reason you are willing to pay "X" amount for something is because you believe someone else will pay YOU more than "X." But there is always a peak and a crash, whether it's a ridiculously-priced house or a ridiculously-priced stock.

Frankly, I would not even pay a forward PE of 30 or 40 for FSLR, and here's the reason why not:

The KEY reason FSLR is worth more than the other solars today is because it is the price leader in terms of cost per watt. But there is only one reason for that price leadership—which is that polysilicon is priced in the hundreds of dollars per kilo, whereas within 2 to 3 years, it will be priced in the dozens of dollars (and not that many dozens at that). Since poly is the #1 manufacturing cost for FSLR's competitors, an 80% decrease in the cost of poly (from, say, $200 to $40)—as is likely to occur over the next several years—will eliminate FSLR's cost advantage. Keep in mind also that FSLR also has one cost disadvantage that its poly brethren do not have—FSLR has to build two panels in order to generate the same amount of electricity that a single poly-based panel will make. That will double FSLR's cost for aluminum, glass and other costs to manufacture a second panel.

When you take this into account, I would not be surprised if in three years, a single poly-based 300-watt panel costs no more to make than (2) 150-watt FSLR thin-film panels. And all things (including price) being equal, who wouldn't prefer ONE 300-watt panel versus two FSLR 150s? In other words, FSLR's panels will actually have to be at least 10-20% cheaper to induce purchasers to buy them because the amount of room they require and the extra installation costs will have to be compensated for.

Finally, how much upside is there for a company—any company—with a market cap of $23 billion? I simply don't see 10-bagger potential for FSLR, whereas CSIQ at a market cap of $700 million or TSL at a market cap of $1 billion could go up 10-fold in a few years and still have a market cap less than HALF that of FSLR today. Another way to see this is to look at the price targets for FSLR, which range up to maybe $350 or $400 (I don't follow this closely, so maybe I am wrong here). That gives an upside of maybe 35%. In contrast, if later in 2008, it looks like TSL will make $5/share in 2009 (consensus today is $4.49, but it was $4.10 just a week or two ago), and by the end of 2008, TSL's PE expands modestly to 16 against 2009 earnings, the resulting price of $80 represents a 2-bagger.

In conclusion, I believe that the solar space will grow vigorously over the next decade, and I believe that at the present time, TSL offers the best risk-reward ratio in this space.

To those not familiar with the solar space, I must close with a few cautions. First, solar stocks are extremely volatile, with 20% daily moves not unusual. So if you do not have the stomach for seeing your position lose 20% of its value in one day, solar may not be the place for you.

Second, the solars have gone up a lot in the past few weeks, and there is a good argument to be made that they need to slide back before they go back up.

Third, there is reputed to be a psychological connection between oil prices and the solar stocks. To me, this was more of a factor in the past than it is now, but it remains a factor. Thus, if oil slides back from $119, where it closed yesterday (as I expect it to), it may take the solars with it.

Fourth, some people believe that the stock market in general is overbought right now and due for a correction back to 12,000, and some think even less than that. That correction may well take the solars with it, although the solar often don't follow the broader market.

On the positive side, we are in solar earnings season, and I think the solars will report well, and several may well get upgraded after announcing earnings. In addition, there is a fair possibility that in the next month or two, Congress will pass the energy bill that will extend the old incentives and create some new ones. Although a fair bit of that is already baked in, I believe the passage of this bill may move the solars up another 5-10%.

Finally, over the next few months, I believe we'll hear other utilities announce their decision to implement solar in a fashion similar to that of Southern Calif Edison. This will spur the notion that we are close to achieving grid parity, and if that pans out, increasing demand will translate to significant earnings growth for the solars.

Whether the "bullish" forces I have discussed above beat the "bearish" ones, I cannot say. But if you are comfortable with the volatility and other risks discussed above, I think that TSL at $43 is a compelling buy, as is CSIQ at around $24.

Disclosure: I own a large position in TSL, and a decent-sized position in STP. My CSIQ shares were called away from me this past weekend since I sold $25 calls against my position about 3 weeks ago, but I may buy more CSIQ on a dip. I am not short any other stock, but also hold a large position in Penn West (PWE), which will be the subject of a future article.

Comments

[oaksleeksbeans]

Great insight on FSLR. What are you thoughts on LDK?

[gebby]

where do you get your forward 2008 earnings estimates?

[gebby]

sol is earning more than $1.08 , stp more, ldk more. please do something about correcting your chart again. sol just raised their revenue and MW sold guidance. stp is closer to $3.00, ldk ?

[Jack Yetiv]

I obtained all the numbers for my table from a report on Schwab called the "Schwab Earnings Report." It shows the range of earnings estimates for 2008, from low to high, and the average. I cited the average, which I think is reasonable because it removes some of the uncertainty of forward estimates.

I would invite anyone else to post a chart of their own, showing their numbers based on whatever single unbiased source they choose.

I would also invite others to comment on why they think, despite a PE of 20 or 30, one of the above companies is a BETTER risk-reward play than TSL.

Don't just bash--add your own thoughts.

As to LDK, its PE is much higher than TSL and CSIQ and it makes poly, a disadvantage in my view. Poly makers are raking it in now, but I believe their margins will fall a LOT in 2009 and even more in 2010.

Jack

[maxbid]

Another excellent write up on the solars. Keep them coming.

I do however agree with gebby that you need to update your estimated 2008 earnings for SOL and STP. Your earnings number for '08 on LDK is probably a little conservative.

[DJSMT]

JASO split 3-1 on Feb 8th

[zawy]

You wrote "FSLR has to build two panels in order to generate the same amount of electricity that a single poly-based panel will make." Do you have a link that shows poly modules will be 24% efficient in a few years? Do you have a good link that discusses the future of polysilicon prices?

[nemo]

Thank you for your analysis. It does seem quite reasonable that silicon will come down significantly in cost. However, to reach par with FSLR, the combination of cost reduction in poly and efficiency rate would have to exceed FSLR's expected increase in efficiency rate and those additional raw material's costs you cite. What is your expected efficiency increase for FSLR? and Does their price/watt calculation based on the cell efficiency, assembled product efficiency, or installed product efficiency? I guess one could make a reasonable argument that installation costs would be equivalent. It's the other two that are probably more relevant.

[TraderMark]

Hi Jack, good summary. I agree with 90% of it. I am also on the TSL camp but its been "undervalued"... since last summer. Thankfully they wised up about that damn poly plant, which would be ready just about time there is a global glut of processed sand.

I'd also separate out the companies in the food chain. JASO, SOL, and LDK are different companies than the rest

AKNS is completely different

and you probably want to throw CSUN in there, minor player

I guess ESLR too but you'd need to have profits to be in that chart ;)

Trina has the best "value" but ironically this is 1 sector where the most expensive (i.e. momentum) gets the most action. I am hoping once Trina breaks technical resistance at 45 it has one of those breathtaking moments we get in solars every so often i.e. SOLF in late 2007. I think without the share overhang in TSL $4 is quite probably for EPS.

[Jack Yetiv]

Again, as I have commented before, although LDK, JASO, and SOL are in a different subpart of the solar business, I believe they are appropriately included (plus, people always asl me about them anyway, so I included them for that reason anyway).

In 2009, that may well be different (due to being closer to a poly glut), but today, comparing all of them on a PEG basis is reasonable, I believe.

CSUN I haven't followed, so I did not include. But please give us a more detailed comment about it so we can all learn.

Your last paragraph is true, but I think darlings exist in every space. That's just part of wall street. I also agree that if TSL can break resistance in the mid-to-upper 40's, it could give us an SOLF or ASTI "moment" (almost 100% movement on those two in about a week or two), but I would sell TSL long before it ran anywhere near that hard.

Probably what I would do is that if TSL ran to the mid-to-upper 50's, I would sell next month's $60 calls and end up making about $62 on the stock (basis is about $42) if it got called away, or keep the $2 or so premium and hold onto the stock.

Jack

[Jack Yetiv]

To Zawy:

Several manufacturers have gone up about 1% per year--14-15% was standard 3 years ago, now STP and FSLR are at 18-19% (production panels), and other manufacturers are only 1-2% behind. FSLR is making 22% in the lab and usually it takes 1-2 years to make that in production. Given the foregoing, it is reasonable to extrapolate production efficiencies in the 24% range in 2-3 years. There is tremendous incentive to do so because even 1% increased efficiency adds a substantial amount to the bottom line.

No single link re: future of silicon prices (my thoughts are based on reading of hundreds of articles), but check the ESLR conf call transcript--I believe they gave information on this.

Jack

Jack

[IBCNU2DAY]

could it be possible that your optimistic outlook for TSL is based on margin estimates that were a result of TSL's having their own poly plant?

and now that their poly plant plans have been cancelled... shouldnt this give LDK the edge?

i am perma-long LDK...

thanks

[IBCNU2DAY]

could it be possible that your optimistic outlook for TSL is based on margin estimates that were a result of TSL's having their own poly plant?

and now that their poly plant plans have been cancelled... shouldnt this give LDK the edge?

i am perma-long LDK...

thanks

[Jack Yetiv]

To IBCN:

I suppose anything is possible, but in this case, extremely unlikely. The fact that TSL was going to make silicon could not have had impact on analyst estimates for 2008 (or 2009, for that matter). The fab was not due to produce silicon until 2011, at the earliest.

I think poly production is a fine business this year, and probably next. I don't think I'd want to be a poly maker in 2010--I think there will be significant price decreases and margins will contract, IMO.

Jack

[solar jim]

Hey Jack,

If solar were a more mature industry I don't think I would have any issue with anything you've mentioned above. The only mistake I think you may be making is in applying good and very solid fundamental analysis on an industry that is still in, for the most part, hyper growth mode at the early part of its lifetime.

Another function of p/e spreads within an industry relates to the markets belief of risk for each company to execute and earn the projected revenue/earnings going forward. Companies in China are harder to ascertain whether the news is actuality, as well as having less news/releases, and so they therefore generally have lower p/e's than western based companies that other than location are exactly the same.

I would argue with your assessment of FSLR and the others being no different. In fact, there is quite a bit of difference. FSLR has a higher profit margin than all the other solar companies. They have already presold 70% of all the panels they will make through 2012, which includes all the currently announced factory expansions taking them to 1 Gigawatt per year by around mid 09. Except for FSLR, all the ones mentioned above use silicon and as far as I know they all make them they same way in that its a slightly modified version of CPU chip making with many less steps than CPU chips, but still lots more time/work to create that wafer of cells than FSLR takes. FSLR is automated continuous line. They've been increasing the Mw run rate of each line each quarter. Even if another company were to start doing thin film with CdTe they would have to find a different way as FSLR's line tech is proprietary and they have intellectual property on that. Most of the other companies buy stock solar equipment from manufacturers.

If you're looking at companies that all use stock solar equipment than I agree with you exactly on selling whatever the higher p/e stock is and buying the lowest p/e stock because they are the same - apples to apples. So while FSLR does have a high p/e it should have a higher p/e due to their tech position over those that aren't innovating at the edge. I'm not justifying the current price or saying it deserves to be higher, but I do believe it should have a premium to the others due to its position. That may change going forward, but right now, they are the clear leader and will be for at least another few years. Of course, what premium they should receive is open to debate. Going forward, I do not expect to continue to see a premium of 100%+ to the average of the field.

[solar jim]

I consider fundamental analysis to be similar to einsteinian physics. With physics it works perfect for 99%+ of the situations until you get to the very very small where quantum effects take over and the rules you've been using don't work anymore and break down. Fundamental analysis is simlar, I believe, when using it on young industries that are not close to being mature slower grwoing companies yet.

[adam axler]

Jack, appreciate your open analysis including potential pitfalls and overvaluing of a fledgeling industry. My article today was based much more on a momentum/sustainabilit... argument. Your technical analysis of these companies is excellent.

[IBCNU2DAY]

Jack,

thanks for the response... i think that margins for solar companies will compress as the prices come down also... which would only be temporary until the demand surges as grid-parity is reached... but i read somewhere and i wish i could name my source... but it made sense to me... that the margin compression in a couple years would hurt the smaller players in the solar food chain the most... mainly the panel and module manufacturers... because the wafer manufacturers would be able to pass the added cost onto the panel makers, but it would be harder for the panel/module makers to pass that cost onto the "financially-stra... consumer...

while todays conference call from WFR is proof that 50% margins are not unheard of for the poly manufacturers... i think the smaller players will have a tough time keeping their margins in the 20% range... (if some of them are even there yet)

but one thing i would like to mention as i work on my "old" Windows XP computer... with Windows Vista implementation across the world in the next couple years which requires the end user to upgrade most of their hardware... wont there be a surge for poly silicon demand from the semiconductor industry?... which i have seen some semiconductor stocks posting some pretty impressive quarters recently... dont those semiconductor companies compete for the same precious silicon?

LDK gets alot of its scrap from the semiconductor industry and this should only help LDK in a couple years as its poly plants come online while they perfect their 6N solar-grade poly... semiconductor poly is 9N grade...

just a couple of things to consider...

thanks again

[greencapitalist]

jack,
jaso is growing at nearly 90% growth y/o/y and on high 70's q/o/q. why not give 30 p/e for such growth.

similarly spwr showed 90% y/o/y growth and except for the one 'flat' word usage by the cfo in the conference call, they are guiding higher and are also telling silicon costs are coming down and 10% cost efficiency is coming on.

a growth company on the range of 90 to 100% certainly can deserve 40 p/e or more.

look at baidu. a company growing 90 to 100% has an astounding 140 p/e!!!!

i think you might be wrong on fslr. fslr will be achieving almost grid parity in 2009 itself. they have 2gw in production with 2 more gw potentially coming from so.cal and canada utilities. pilot is on. i dont think silicon can come anywhere near grid parity at all in near future. not only that once fslr goes closer to 4gw or 5gw, they can easily thump even grid parity cost wise per wattage. which solar company can do that in 2009 or even say 5 years from now.

fslr with 5gw assured orders will be in 500's since its earnings will have to be doubled and trebled. also they are planning on residential small panels for solar generation at very cheap prices. this is a new area which can prove wonders for them.

[SBBob]

I've found your articles quite interesting.

Do you have any opinion about Nanosolar and what impact it might have on investments in other solar companies?

[Jack Yetiv]

To Solar Jim:

Agree with much of what you said about FSLR. It does deserve a premium, just not a 10:1 (1000%, not 100%) premium on PEG for 2008.

According to the Schwab earnings reports I used as my source, the average of 27 analyst estimates is that FSLR will earn $2.49 in 2008, and $5.09 in 2009. Fast growth, yes, worth 100 in forward PE, not in my opinion.

SPWR numbers--2008, $2.07, 2009, $3.24. Not worth 45 FPE, IMO.

JASO--2008, 87 cents, 2009, $1.36, nice growth, but does it justify a PE about 2.5 times higher than TSL's?

TSL--2008, $3.39, 2009, $4.49, but I think these numbers may go up once cancellation of poly factory is factored in.

Problem with FSLR is that once poly becomes cheap, much of FSLR's price advantage will disappear--and I think that might well happen within 24 months--and stock price may well tank well in advance of that event (as the gap starts closing, long before the gap is closed).

To IBCN:

Margin compression on the panels will depend to a large extent on one thing--oversupply of panels, and that will depend on whether my first two articles this week are right that demand for panels will grow faster than the experts believe. I believe poly-making margin compression will come sooner than panel-makers margin compression.

SPWR's guidance about flat 3rd qtr but making it up in the fourth was not believable to me and frankly does not make much sense to me.

More thoughts tomorrow.

G'night.

Jack

[frflyer]

SBBob asks about Nanosolar. I had the same thought.
It looks like they are already at grid parity. All they need is to go public so they can ramp up production.

"Nanosolar’s founder and chief executive, Martin Roscheisen, claims to be the first solar panel manufacturer to be able to profitably sell solar panels for less than $1 a watt. That is the price at which solar energy becomes less expensive than coal.
With a $1-per-watt panel,” he said, “it is possible to build $2-per-watt systems.
According to the Energy Department, building a new coal plant costs about $2.1 a watt, plus the cost of fuel and emissions, he said."
from www.grinzo.com/energy/.../

I think people are underestimating the growth potential for solar. The U.S. market could be huge, especially with more incentives in the short term. Solar thermal could play a big part in the future. It is so low tech, we could have been doing it many decades ago.
The following links give an idea of how big solar could be, if the political will was there. Wind too.

Scientific American A Solar Grand Plan
www.sciam.com/article....

www.setamericafree.org...
A Blueprint For U.S. Energy Security

"I'd put my money on the sun & solar energy. What a source of power! I hope we don't have to wait until oil and coal run out before we tackle that." Thomas Edison, 1931

"The same acre can produce 10 times as much energy from wind as it can from corn ethanol, 180,000 miles per acre per year. But both corn ethanol and wind power pale in comparison with solar photovoltaic, which can produce more than 2 million miles worth of transport per acre per year." www.ecogeek.org/conten.../

Here's what the U.S. is missing out on by being stingy with alternative energy incentives.

"There are areas in Denmark and Germany who use more than 40 percent of their electricity from wind. From what I have read, they are less concerned about the intermittency than we are in the United States even though we aren't at 1 pecent yet. Why? Because we are told by the fossil fuel guys, hey, can't use wind, can't use solar, what about the intermittency. If wind gets up to 40 percent of the electricity we use and solar gets up to 40 of the electricity we use, the other percents of electricity we need can be made up from the fossil fuel plants that are still there. If they are run less at full power, they can last a long time. That can be your electricity `battery.'"

gristmill.grist.org/st...

It's no coincidence that we have no U.S. equivalent to Vestas in wind.

from the Scientific American article

"The greatest obstacle to implementing a renewable U.S. energy system is not technology or money, however. It is the lack of public awareness that solar power is a practical alternative—and one that can fuel transportation as well. Forward-looking thinkers should try to inspire U.S. citizens, and their political and scientific leaders, about solar power’s incredible potential. Once Americans realize that potential, we believe the desire for energy self-sufficiency and the need to reduce carbon dioxide emissions will prompt them to adopt a national solar plan"

"Like nuclear plants, coal plants tie up great gobs of capital during their extended construction periods. For the sponsors of such projects, the shifting sands of economic uncertainty can spell financial disaster, as many a utility learned the hard way during nuclear's fiscal meltdown."

"In contrast, solar, wind, and conservation all have shorter lead times, a fiscal advantage not sufficiently appreciated, especially in uncertain economic environments like the present. So in addition to loving these options for being "green," planners can also love them for being "just in time."
gristmill.grist.org/st...

Abu Dhabi to invest in solar power plants
"Abu Dhabi is not content to just sell you the oil that fuels your SUV; now its going to sell you sunshine to keep your lights on and power your electric car when the internal combustion engine goes the way of the buggy whip. Masdar, the oil-rich emirate’s $15 billion renewable energy venture, and Spanish technology company Sener on Wednesday announced a joint venture called Torresol Energy to build large-scale solar power plants in Australia, Europe, the Middle East, North Africa and the United States."

"Torresol initially will invest $1.2 billion in three solar power plants to be built in Spain but the company is targeting the global “sunbelt” for future expansion. Masdar will take a 60 percent ownership stake in Torresol with Sener holding a 40 percent stake. A Torresol spokesman declined to reveal the dollar amount of the investment. A prime market for Torresol will be the U.S. desert Southwest, where companies like Ausra, BrightSource Energy, Solel and Abengoa Solar are competing for contracts with utilities PG&E (PCG), Arizona Public Service (PNW) and Southern California Edison (EIX). Torresol potentially could shake up that market, given its very deep pockets and ability to independently finance billion-dollar solar power plants."

"The irony is too rich to leave unsaid: A leading oil producer invests billions in carbon-free energy while a leading consumer of fossil fuels - the United States - continues to subsidize Big Oil while offering only tepid support for green technology. It is inevitable that climate change will foster the rise of renewable energy - the only question is which countries and companies will profit from the new energy economics. It is entirely possible that the U.S. will trade energy dependence of one kind - on Middle East oil - for another - on Middle East and European solar technology - in the era of global warming. It’s no coincidence that most of the solar energy companies with contracts to build utility-scale power plants in California and the Southwest have overseas roots - Ausra hails from Australia, BrightSource was founded by American-Israeli pioneer Arnold Goldman, Solel is based in Israel and Abengoa is headquartered in Spain." from Green Wombat

blogs.business2.com/gr.../

www.setamericafree.org...

The above shows how much oil gets in public money by comparison, and what it's other hidden costs are.

[Jack Yetiv]

Excellent comments and great links, Frflyer.

Jack Yetiv

[PKS]

Thanks Jack for such a GREAT article!!!

[DeepLogic]

Be careful this week. Once FSLR reports and diasspoints somewhere in their earnings report, all solar stocks will caugth in the vortex and trade down. As the whole sector sells off, the selling will accelerate and overshoot on the downside. It may take all summer and will look much like the implosion of DNA firms, all of which a tenth or a hundredth of where they were in the hype of 1999/2000. And there is the inevitable fall in oil prices...All told, FSLR maybe looking at $30/share in 12-18 months.

[Jack Yetiv]

FSLR does indeed have the capacity to tank the solar stocks short-term IF it disappoints, which it well might (note SPWR and STP after recent earnings). On the other hand, if FSLR does not disappoint, it might be a rising tide that lifts all ships.

Also, in early to mid-May, other solars will report and they will report well, IMO, so even if FSLR disappoints, other solars may do well and run.

It is VERY difficult for me to guess which way FSLR will go.

Jack

[oaksleeksbeans]

I recently ran some numbers on Biofuels vs Solar powered electric cars for the Midwest. The future of travel is renewable electric!

Good agricultural land produces 5 dry tons of biomass an acre per year, each dry ton can produce roughly 100 gallons of fuel per ton and if we assume cars can get 50 miles per gallon, than each acre of land could produce enough fuel to drive a car 25,000 miles per year.

About 250 kilowatts (kW) of solar electric modules would fill that same acre of land. In Wisconsin that 250 kW system would generate 300,000 kWh per year. An electric car will go at least 3 miles per kWh. An acre of solar modules could drive electric vehicles 900,000 miles per year.

Solar power is 36 times more efficient than biofuels at powering vehicles (even given Wisconsin solar resource). If we move to cellulosic ethanol from switchgrass solar power is 12 times better.

Solar power has other benefits, such as: solar power does not require land – roof tops are fine, solar module conversion efficiencies are being raised significantly (so less area would be needed per unit of energy produced), and electric cars and their batteries are in their infancy with efficiency gains remaining.

Meanwhile, biofuel crops must be harvested, transported and processed into the biofuel and sold to customers at biofuel stations. While solar power can go directly into a car’s battery with no moving parts.

Agriculture also means fertilization, tilling, soil loss, and irrigation. While solar power systems require very little maintenance and have a 30 to 40 year expected life.

Why the heck are we even pursuing biofuels???

[tessant]

jack,
what is your email?

[mojotronic]

After checking the key statistics for TSL versus SOLF I can't see how TSL is a better buy for the price. In some key statistics TSL looks better on paper, but SOLF has less debt and double the quarterly revenue growth. While trading at a fraction of TSL's cost, its EPS is projected to be double TSL's in a year. (A key statistic omitted from your chart.) It also has a production capacity of 120 Mw per year, double TSL's 59.8Mw. SOLF was overbought when the media pundits pushed it as "the" solar stock to own, then dramatically oversold after the markets dropped in January and the newbie lemmings who blindly follow certain celebrity pundits all panicked. The embarrassed pundits subsequently proclaimed it a "sell sell sell" and it's been a weak sister ever since.

[Jack Yetiv]

To Tessant:

I prefer not to post my email address publicly. If you need to reach me, you can send a message to SA, and they will forward.

To Mojo:

According to my data, SOLF is project