Charles Morand

The Year Ahead For US Wind

Andrew:

I disagree with you that "most expect solar to be the primary alternative energy source in 20 years time." On what basis is that anyways? Total MW installed? In 20 years, the total amount of MW of solar installed globally won't come close to that of wind. In some areas, solar will surely predominate, while in others it will be wind. In the US Midwest, Northwest, Northeast and Texas, as well as across Canada, it will be wind. Sounds like the kind of market I could put some money behind.

The prices of wind installations have actually been increasing, not because the industry has ceased making technological improvements but because wind is impacted to a much greater degree by an inflationary environment for a number of critical components like steel, copper, cement, etc. than is solar. The wind supply chain is very tight at the moment, allowing manufacturers to pass on cost increases and some...

Wind turbine sizes have been increasing steadily over the past few years, as has the average size of wind parks. Once inflationary pressures settle (which, BTW, are affecting other forms of power generation), the cost of wind will resume it's downward trend. The average size of a commercial solar PV park doesn't even come close to that of wind, and the solar industry remains completely fragmented and in the midst of a technological race.

While solar does hold great promises, it is for the time being a far more volatile and risky sector than wind is because, by and large, valuations aren't underpinned by earnings. When they are, PEs are through the roof, and history shows that wildly above-average PEs can only be maintained for so long.

BTW, in the world of power generation, a 100% cost difference is considered pretty significant, so claiming that "wind is cheaper than solar...but not by much" isn't a true statement.


On Aug 08 10:10 AM Andrew Ling wrote:

> Wind is cheaper than solar as of this moment, but not by much. As
> you mentioned a 1MW turbine costs about $2 million or $2/watt. FSLR's
> systems are $4/watt installed. However, wind has very high maintenance
> costs. About 1 in 10 turbines you see in Europe will be non operational.
> Also, wind generates most of it's energy late night and early morning.
> Electricity is less valuable off-peak. Solar obviously generates
> it's electricity during peak hours when it's the most valuable.
> The main reason investors prefer solar though is the often quoted
> fact that module prices have fallen 7% a year for the last 40 years
> on average. Wind turbine prices have barely budged. This is why
> most expect solar to be the primary alternative energy source in
> 20 years time.
>
> Additionally, the only predictable wind plays at the moment are the
> turbine manufacturers such as Vestas and Gamesas who are not traded
> on US exchanges. A carbon fiber manufacturer such as Zoltek is no
> more a wind play that a polysilicon producer such as MEMC is a solar
> play. AMSC is a small cap with no earnings. This week's price movement
> shows you the risks involved with these stocks. FSLR, which I have
> owned for 18 months, has never dropped double digits in a single
> day despite how overvalued many people claim it to be.