Solar's Brightest Companies Named; Sector Outlook Is Dim

By Ucilia Wang

A weeklong gathering of solar companies in Spain ended Friday with predictions of a tough year ahead. Solar companies announced deal after deal to impress investors as 715 companies and more than 20,000 attendees gathered at the European Photovoltaic Solar Energy Conference in Spain.

But falling crude oil prices, a result of a weak demand, and predictions of a difficult year for the solar industry in 2009 likely dampened investors' enthusiasm. Solar stock prices slipped during most of the conference.

Share prices of major players, such as SunPower (SPWR), Suntech Power (STP), First Solar (FSLR) and Trina Solar (TSL), headed south for most of the week before rebounding on Friday.

LDK Solar (LDK) saw its shares open at $50.51 per share on Tuesday and closed at $45.15 per share on Friday, despite announcing contracts to sell its silicon wafers and buy equipment to equip new manufacturing plants (see LDK and GT Solar Make Nice). Shares of First Solar opened at $270.40 per share on Tuesday and closed at $236.01 per share on Friday.

After meeting with key industry players at the European Photovoltaic Solar Energy Conference in Spain, analysts said shifting government policies, a potential oversupply of silicon and hype about the next hot markets will converge in 2009 to weed out weak companies.

"The year 2009 could start to show signs of bifurcation between long-term winners and the companies with a ‘me-too' strategy in the solar sector," wrote Lazard Capital Markets analyst Sanjay Shrestha of Lazard Capital Markets in a research note Friday.

Solar company executives and analysts have predicted a drop of anywhere from 5 percent to more than 20 percent in solar panel prices next year. During the conference, SunPower CEO Thomas Werner told Reuters that panel prices will likely fall between 10 percent to 20 percent in 2009.

Jeff Osborne, an analyst at Thomas Weisel Parners, has already aired his pick of winners. "We see Suntech (high volume, low cost), SunPower (high performance and vertical integration), and First Solar (low cost, high volume) weathering the storm well," Osborne wrote in a research note.

In spite of its location, the conference didn't produce much more clarity on the fate of the lucrative solar incentives in Spain. The country has become a booming market thanks a government policy that requires utilities to buy solar electricity through long-term contracts at prices higher than conventional power.

But the policy is about to change. The current prices and 400-megawatt installation cap are expiring at the end of this month, and Spain's energy commission in July proposed capping the overall installation capacity in the country at 300 megawatts for 2009. 

Although the government hasn't announced any change to the July proposal, the country's energy secretary Marín Uribem said that an increase could be coming. Speculation about the new cap ranges from 400 megawatts to 500 megawatts (see Spanish Incentives Speculation Increases and Spanish Energy Commission Votes to Shrink Incentives).

Already, companies are making bets on the next big market. Italy has been a front-runner, thanks to comments from company executives. But analysts said they don't believe it. "We also have a hard time believing management teams ... saying they have 20 to 30 percent share in Italy and how the Czech Republic will be 300 to 500 megawatts in 2009 (up from less than 1 megawatt in 2007)," Osborne said in the research note.

Italian government officials and manufacturers have weighed in, saying the country's appetite for solar isn't likely to be as grand as expected. Although Italy also has an incentive program in place, its bureaucracy has made it difficult for companies to gain project approval.

Angelo Nogara, managing director of Solkraft Italia, told Reuters that many solar power plants have had to wait a year after completion before being connected to the grid. Nogara also recalled the case of a local government requesting a report on the acoustic impact of a solar power plant, which doesn't produce noise during operation.

Meanwhile, the European Photovoltaic Industry Association on Thursday said its members, which make up more than 95 percent of the European photovoltaic industry, unanimously agree that photovoltaic energy could provide 12 percent of European electricity demand by 2020.

Disclosure: None

Comments

[CT Programmer:]

Prices for virtually all stocks slipped during this conference. Does that mean that the stock market is down BECAUSE of this conference? This is such a BS article. Shares slipped last week? You don't mention the incredible boost that they are coming off of from a very positive earnings season in the weeks prior to that. The statement "The year 2009 could start to show signs of bifurcation between long-term winners and the companies with a ‘me-too' strategy in the solar sector" could be replaced with 2008, 2007, 2006, etc.. Despite the recent pullback in oil, it is still up about 30% over last year and the trend of decreasing production and increasing demand will stay in place for years. Combine that with states in the US requiring annual increases in "alternative" energy production from utilities, and the future for solar is the same as it has been for a long time. It is on the rise. They're all rapidly expanding production, and if the cost comes down, that will end up increasing demand. Nothing has changed because of this conference.

2008 Sep 08 08:10 AM

[it-trade:]

I've seen several mentions in the news lately about drop in solar panel prices. What's the problem, everyone knew that solar would get cheaper. Cheaper panels = more panels sold = good thing.

2008 Sep 08 09:31 AM

[sirfisup:]

The writer is can't make up his mind as to whether he is for or against the solar industry and makes a poor argument from both sides. To say that the PPS of solar companies dropped as a result of one conference is laughable. The expansion of alternative energy continues to gain momentum and I wouldn't be surprised to see Spain rethink curtailing its feed in tarriff policy for solar after Russia's recent invasion of Georgia. Secondly the oil ministers of OPEC recognize that they are in the home stretch of securing ridiculous profits and are only concerned about reshaping their own economies when oil is no longer the world energy of choice.

2008 Sep 08 10:51 AM

[Road Runner:]

Thank you for the well written article. Others thinking of posting articles should take a note of his writting style - to-the-point and free of "life story stuff".

sirfisup - he wasn't tring to spin his story to lead us in a direction. He was just reporting what he saw as the important information. Do you need people to lead you around?

2008 Sep 08 11:31 AM

[petyaczar:]

It Trade,

I'm with you, Apparently some "talking heads" have decided that while Moore's Law did wonders for the computer industry, Petyaczars "Solar Corollary to Moore's Law" will not do the same for the solar industry.

The soct of solar panels will continue to drop significantly, as their energy production efficiency continues to improve significantly. The resulting drop in cost per unit of power will result in MORE DEMAND, INCREASED PRODUCTION, and further lower costs of production.

This will indeed drive cost downs while increasing demand and thus drive revenues and profits up! IMO. When did the solar industry go from "a critical silicon shortage" to "an oversupply of capacoty" apparently at some time the solar industry must have been in perfect balance, when and where? - never happened, more growth, SHINE SHINE SHINE is the solar equivalent of DRILL DRILL DRILL for oil.

You said it best IMO

Cheaper panels = more panels sold = good thing.

These talking heads need to go back to school, stop talking and start listening and thinking.

2008 Sep 09 08:17 AM

[Dr. Dave:]

Much distorted information outthere regarding solar and other forms of true alternaqtive energies when contrasted to oil or the price of oil!

First, global energy projections by the scientists who are not part of the payroll of any company, oil or otherwise, point out oil will only provide up to 20% of global energy needs as such global energy needs continue to expand geometrically over the next decade or two. True alternative energy sources are projected to come primarily from solar, wind, hydro, and geothermal with nuclear and coal both on the periphery. Natural gas will play an undecided role. For sure, the first four sources will provide the cleanest and cheapest, assuming the government leasders show strong leadership and keep oil companies from delaying too much the transition. Delay will only continue to hurt economies, but also continue to create more environmental problems from the excess carbons, etc. Oil companies have no financial incentives without massive government subsidies to help the transition. Horse travel was a big business until the motor was invented and the horse related businesses did not have incentive to see a change either. But change will come, either faster with strong leadership, or dragged out with either poor leadership and or bought off legislaters. "Drill, drill, drill is a advertisement from the oil companies, not a smart sign of vision or leadership!

Solar will continue advancing dependeing on the geographical locations...some parts of geography are best suited for wind, other geographies for solar, etc. From an investment standpoint (not a speculative standpoint), the specific company should be seriously studied as to their strategic plans (and capabilities to carry out the good ones). Currently, speculators are treating most solar companies the same...as one goes up so does the rest, and vise-versa! Solar companies will continue to go through a process of merging and dying out. Watch also how their growth measures are looking, eg., PE projections. Already, a few companies are beginning to glow!

2008 Sep 09 03:55 PM

[Dr. Dave:]

So much misinfomation about solar! Solar will be here to stay regardless of what oil does! Global energy projections indicate oil will only be able to account for, at best, 20 % of global energy needs over the next decade or two. That means, drill all the oil you can find, you still will not be able to handle the demand! As to solar and wind, it depends what part of the geography you live in. For example, Pickens is showing you where wind is good...he doesn't show you or talk about where solar is best! Maybe because he is lobying for his companies!
Nevertheless, solar will remain in high demand. The real issue from an investment standpoint is which companies will survive? That is where one needs to read carefully what strategic plans each company has. By the way, hydropower will also be advocated more as time goes on as geothermal will also. All of these sources are the true alternative energies that do not contaminate the atmostphere. If Washington gets a strong leader for true alternative energies instead of more of the same illusion that more drilling will magically solve problems for energy needs, thinfgs will even move more quickly. People need to learn about energy needs from the scientists who study it, not the self-interest folks who advertise it!!

2008 Sep 09 03:57 PM

[SolarGuy:]

Is SPWR becoming the Government main contractor for installing solar systems on Federal sites.
They just completed installing a solar electric system on top of the roof top for the Dept of Energy Federal Building in Washington D.C. Sun power has also installed solar system for other government agencies such as the US Navy in Hawaii and Calf, The US Postal Service, and Air Force bases.
They have under contract to build a Solar system at Kennedy Space center site.
The company has no debt and over the last 3 months insiders have purchased a net 56.0K shares. This is in stark contrast to the 2-year quarterly average where insiders are net sellers and indicates that insiders are more bullish about SPWR's prospects for the next 6-12 months.
They need no Gov tax incentives...The Gov is paying them for their solar systems.

2008 Sep 10 11:19 AM

[supershort:]

Solarguy:

You are dead wrong. The insiders have still been dumping at SPWR. Cypress sold 2.5 million shares. Yep, they sure are buying. This one will be in the 20's by January '09.

2008 Sep 15 03:34 PM

[tessant:]

STP long and strong!!

2008 Sep 16 07:43 PM

[sdcougar:]

Besides the problems with capital these days, the problems with the 'global warming' thesis will not be able to be avoided by the news media within another year.

2008 Oct 17 03:55 PM