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A prescient seller of solar years ago, Gordon Johnson is more bearish now than he's ever been -...
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Saturday, January 5, 9:45 AM ETA prescient seller of solar years ago, Gordon Johnson is more bearish now than he's ever been - even with most of the stocks trading at fractions of their old values. China alone has far more panel production capacity than the world needs, and it's still adding more thanks to the government propping up these cash-flow burners. U.S. government policy is equally perverse. Top sells: FSLR, YGE, TSL, STP, ASYS.
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Didn't your mother teach you that if you don't have something good to say, keep your mouth shut?
As this is an investment web site, please take your political garbage to the dump where it belongs.
Instead spend that money on pure research and you might have a chance to achieve your dream.
Or were you only suggesting that "anti-liberal" spewings are welcome?
I bought LDK@0.88
http://seekingalpha.co...
Once a solution is found, solar panels could be installed in large quantities wherever there is a industrial warehouse or parking structure or they could cover freeways and highways etc etc. the concept of creating electricity would completely change from a local power plant to a universal concept of creating it where its needed or at least much closer to it.
Also transferring solar to kinetic or heat energy for storage, or multiple other mechanisms, all currently being developed and deployed by multiple private entities.
With many solar companies moving out of module sales and moving into complete installation sales, investors in solar energy stocks need to think like a utility company, not Gordon Johnson. As the cost of solar comes down it only makes sense to build more plants.
FSLR is by far the leader and innovator and I would not bet against them.
In five years when LNG is double the price that solar energy becomes much more valuable. your post is very short sighted thinking. You must be a conservative...
Read the actual story in Barrons, both those plants Buffet bought had PPA's. A PPA (power purchase agreement) guarantees the owner of a plant a set price for electricity over the life on the contract. Since this rate allows for stability in forecasting the revenues of the plant over the time period of the PPA, you can use a DCF analysis to value the plant. If the rate in the PPA is higher than market rate of electricity, the value of the plant with a PPA is worth more than the value of a plant without a PPA, since the PPA guarantees higher than market revenues and profits.
The link to the EIA page that shows total cost per megawatt hour is:
http://1.usa.gov/104jN4g
Cost for combined cycle nat gas are $63 vs $152 for photvoltaic solar.
If you think you can forecast natural gas prices over the next 5 years, you should get a job as a consultant, because I know of several dozen companies that would love that information. I work on valuing and developing power generation facilities for a living, so I know what I'm talking about.
And if by conservative you mean I don't invest in companies who can only compete based on government subsidies that are expiring around the world, I guess I am conservative.
BTW you don't have to say that the PPAs were signed a long time ago on buffets plant, we all know that already. We also don't need lessons on what PPAs are, thank you very much.
and this is about investing in companies that can't support themselves without government subsidies, it's about whether or not you think solar stocks in general are going to go up or down. It's also about the merits of opinions from people like Gordon Johnson. The same Gordon Johnson that predicted mid 2012 that FSLR stock would essentially be worthless by 2013.
and yes I can make an educated guess to realize it's highly likely NG prices will be somewhat if not much higher in not too distant future.
(1) producers are finally realizing that drilling and producing from even fracked wells is not as economically viable as first thought.
http://bit.ly/Scuq1p
(2) Even the huge behemoth oil and gas companies like Exxon are losing money on NG.
http://bit.ly/ILi5LY
It's only a matter of time before industry consolidation occurs or production of NG stops expanding, which should drive the prices up.
(3) because of (1) and (2), it's only a matter of time before more NG is exported, which would also drive prices up.
Seems logical to me.
The only export facility approved won't be online until 2015 at the earliest, and even if facilities other than Sabine pass are approved, they wouldn't be completed for 3 years at least. Gas prices will go up, but not for another 3-5 years, as new industrial facilities are built. Even then, with drilling in even the least profitable shales economic at $7, once prices hit $5 massive amounts of new production will come online.
All of this is slightly off topic. Solar isnt competitive on a stand-alone cost basis with nat gas, coal, or nuclear, and cannot provide the stable baseload capacity the grid needs. Because of those facts, coupled with the fact that solar subsidies are expiring, there is a bearish picture for solar stocks. Everyone can hate on Mr. Johnson all they want, but he did say short FLSR at $150.
I don't know about you, but I generally need my lights on mostly at night, when it's dark.
I was making the point that solar actually makes more sense from a commercial-industrial investment point of view, since after being funded via a one time cap ex, and with the subsidy, the ROI is less than 5 years, at which point it becomes a profit-making unit in the entity. This means the entity becomes more productive and increases its earnings. And this is good because it feeds back into the economy, via better paying jobs, increased domestic economic activity, etc.
Certainly the subsidy helps, and the subsidy is obtained from the government, and thus the taxpayer. The return is better paying jobs, an increasingly more productive economy, and less export of domestic currency to import energy (something like 30% of our trade deficit is in energy). Reducing our trade deficit is also a great end to this investment. Germany understands this, and it's a reason why it has been so aggressive in subsidizing and promoting solar.
Most observers view solar only through the prism of utility scale projects and its subsidy, but this is the wrong idea. Utilities don't much like solar because you need to oversize capacity by a helluva lot to account for variations in sunlight. Wind is more reliable when it comes to picking between the two. The dynamics favor commercials buying solar, and it's why I favor (SCTY) over utilities looking to install solar.
Additionally, the end user doesn't have a cost that utilities do with solar/wind -- the power electronics needed to deal with intermittent power's effect on a large and complex distribution network.
But that said (I try hard to be intellectually honest about things), the paybacks are usually positive, but usually quite long without the subsidy. Long enough that they wouldn't do it without the subsidy. That of course depends on a lot of individual factors, but it is generally true.
OTOH, another consideration is that solar panels held up quite well during Sandy. Resilience of supply is worth something.
Definitely agree that the value is in the development, financing, and sales mark-up's. And yeah, for utility-scale stuff, capturing that above-market rate on a PPA. So the downstream businesses are the place to be in solar/wind.
This one is interesting. I'd suggest that younger growing entities with long timelines are more apt to accept a lengthy turnaround. The subsidy reducing the time needed to earn a return makes more entities willing to avail themselves of it.
For example, house flippers usually use the lowest cost products in a renovation. A lot of the time, that low cost product will last some 5-10 years; perhaps longer. They would also likely not need to throw in solar to make their flip profitable. Buyers who do the reno themselves and have timeframes of 10+ years or more, will usually go for higher quality and more expensive products.
I've had folks who work for me specifically ask me that question "well, how long do you want it to last?" My answer is always "so my children don't have to deal with it in their lifetimes"
You can see the difference in perspective right there, but to elaborate further:
An owner of a profitable commercial entity looking to do business for the next 30 years is more likely to invest in a non-subsidized solar system with a ROI of 15+ yrs.
An owner of a profitable commercial entity looking to retire in the next 10 years is less likely, unless s/he can derive value added benefit from the investment (it makes for a higher price).
Once the ROI go down to 5 years from 15, the probability that the second person would choose to invest in same increases.
John that was a proposed oil pipeline, not the gas gathering system.
* Payback < 3 years: just about a no brainer (if they believe your offering says what you claim it does)
* Payback 3-5 years: more difficult sale, but doable
* Payback 5-10 years: far more difficult sale, has to involve some combination of a) involve big absolute dollar savings, b) be central to their business, and/or c) have a big "option value" (e.g., if your baseline is too conservative, potentially very large payoffs)
* Payback beyond 10 years: same as above, only far more difficult and need far more attractive picture on that combination of payoffs
I think unsubsidized commercial solar is generally not there YET, but CAN get there in next few years. The good news is that it doesn't solely rely on geniuses coming up with technical breakthru's -- it can get there via breakthru's on the downstream side in business models, financing models, and scale/experience efficiencies.
"but all circumstances are different"
They are. But I don't know what precisely you are getting at, other than confirming my point that commercial and industrial entities benefit greatly from solar installations. And should foreseeably continue to do so.
I recently did some NG conversions from oil and my payback was 1-2 years, it's jaw dropping how badly oil is priced right now.
Unfortunately I don't see NG jumping in price and creating more demand than what's already out there, so that's kinda tough.
Overall though I agree with what you put up there, and have noticed a lot of the solar systems are approaching that < 3 year limit with the subsidies. I'm actually really impressed with what SCTY sells at on a per watt basis to outright purchasers (non PPA).
Boilers.
The real bang for my buck is actually in solar hot water in large commercial/investment properties where heat/hot water is the Landlord's responsibility.
Btw - I'm in NY. And the guy I like most for solar hot water in large commercial properties has his primary business in PA, so this isn't Florida or Arizona with their favorable solar qualities.
"I've also heard that certain installers won't put panels on roofs that are more than 15 years old"
Makes sense since most roofs are guaranteed for 15 years (flat/rubber/asphalt) by the installer; obviously other kinds of roofs have other issues, slate, porcelain, metal.
In terms of subsidies, the big one is the 30% flat federal subsidy against your tax liability. All the state, county, city, utility stuff is small potatoes by comparison, although it can add up to quite a bit.
:-) BTW, thank you Buffett
Surely, solar will be getting a piece of that kind of investment. I personally want to go solar within 3 years, largely for the independence and as a hedge again whatever.
China Gov is now letting smaller players go to the wall and told CDB to only support a select list of the larger players. There are a couple of expansion projects still in construction (Renesola's new 10,000mt silicon plant) but they are the exception not the rule. The market will stabilise this year but that's still a year away.
So all in all I agree FLSR do look a little shaky as the fundamentals of the business (cd-te cell tech in competition to silicon cell) is suffering a cost disadvantage at the moment. This may recover in the future as they have an efficiency improvement road map which will improve comparative cost structure against silicon but in the short term profits will come from the project development business.
The cost of solar energy, specifically to commercials-industrials, and the ROI on investing in a system, is what I focus on. I don't care about utility scale projects, and I don't care about panel makers.
(TAN) will hit $25 by Columbus Day.