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Serious Questions About Canadian Solar

The decrease in silicon cost does not change the importance of year over year earnings being 18% less (which they did not "keep a secret" as was implied by the author). What happens from here as Germany buys less and Chinese subsidies are gone?

Otherwise, CSIQ is my pick for beating FSLR over the long term.

1 GW manufacturing capability (equal to FSLR's actual production this year) and yet their market cap is 13 times lower than FSLR. Sure, FSLR has 3 times the profit margin and is growing faster, but the factor of 13 makes me wonder.

Further Musings on Solar Stocks

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?

When Will Solar Achieve Grid Parity? We're Already There!

Jack, stop fudging everything! 24*0.71/6= 2.666 so solar is "almost 3" and not "a little over 2" times more expensive per W installed than for coal. The real competitor that investors should be interested in is nuclear which is 24*.9/6= 3.6 times more nuclear energy per W installed over solar W installed.

Solar Power Will Be Transformational in the Next Decade

Jack, you changed the input data to "prove" your point. We were talking about 13 cents/kWh and you're using a gracious "effective-efficiency-... of 30 years instead of the standard 25 years. A 3rd source of fudging is that you didn't do APR correctly. Even with your gracious 30-year effective-efficiency-l... monthly payments would be $60, so the rate is 16.4 cents/kwh instead of 15.

If you'll look at my comments, you'll see that i similarly found that $5.4/W is break even for 7% loan and if electricity costs rise 3% a year and if we can get a interest deduction, so we're not really in disagreement. I just want the math and assumptions to be correct and precise. Being off just 1 cent/kWh over 30 years is $3,900 on a 6 kW system (about $2000 in today's dollars when adjusted for inflation).

When Will Solar Achieve Grid Parity? We're Already There!

Jack, I got lucky and found a reference. It says coal operates at 71% of capacity and nuclear operates at 90%. 71% of 24 = 17 hours, almost 3 times more than solar cells in a 6 kWh/d/m^2 area.

www.geo-energy.org/pub...

Solar Power Will Be Transformational in the Next Decade

Your article doesn't take into account the upfront costs when calculating payback. You assume banks will give out 0% loans on the initial $30K investment, or that rich people who can afford the upfront costs are satisfied with 0% return on the investment. If electrical grid energy costs increase 3% per year and you or your bank are satisfied with 7% return on the $30K investment, you have to use a 7%-3%=4% depreciation factor. In this scenario, the $4.5/Wp installed costs you propose in a typical 6 kWh/day/m^2 location (this includes clouds!) at today's 13 cents/kWh, it will barely break even over the 25 year "efficiency-effective" lifespan of the solar cells. If it's in a new house where you can depreciate the home interest expense and are in a tax bracket of 25%, then the depreciation factor is 7*0.75-3=2.6% then payback can occur at $5.4/W installed which i believe is very doable.

There is no simple energy storage solution. The raw materials in EEStor supercapacitors cost $10/kWh, about 50 times less than current generation lithium-ion. See BCON for 10-hour energy storage with 25-year lifespan that could cost less than $1/kWh. Even at $1/kWh, storing half the energy of Jacks $30K, 7kW system in 6kWh locations will cost 7x6/2= $21K. Flywheels with carbon nanotube technology ($4/pound in 5 years) could solve the energy storage problem. They use vacuum and magnetic floating to keep 80% of the energy for 12 hours. Currently used in energy storage for cranes, trains (start/stop regeneration), and telephone systems.

When Will Solar Achieve Grid Parity? We're Already There!

It has been clearly demonstrated and backed by FSLR comments that solar is not competitive with coal or nuclear until installation costs have reached $1.5/Wp. The biggest error in your article is that you seem to equate a solar Wp with watts. Over the 25 years or so for a solar system, there is only 6 kWh/day for each 1kWp installed in sunny locations whereas a coal or nuclear plant is producing 24kWh/day for each 1 kW installed. So first you need to multiply your solar costs by 4 to be comparable. Then consider nuclear plants last 40 years and cost about $3/W installed, which is 2 times cheaper than $1.5/Wp of a solar installation since
1W = 4 x 1Wp
In other words, you have to install 4 Wp of solar to get the same output of 1 W installed of coal or nuclear. Then consider nuclear lasts 60% longer. These advantages are offset by the fuel, disposal, regulatory, and maintenance costs of nuclear. In short, it has been well-documented that $1.5/Wp installed solar is equal to 5 cents/kWh in sunny locations and assuming 25 year lifespan and 5% loan on the capital costs. 5 cents/kWh is the same costs utilities get from coal and nuclear, using the same 5% loan scenario.

Coal puts out far more radiation than nuclear. Nuclear plants can be built in 4 years, at least outside of the U.S.

Canadian Solar: Value Diamond in the Alt. Energy Rough

Jack's comment about the storm probably resulted from CSIQ mentioning that the storm had no effect of 4Q results.

The "value" of a company is pretty much DEFINED by Jack's method. All the things David White and User mention are already INCLUDED in Jack's methods, except for price wars, which Jack counters with the drop in silicon price argument. I would like to know how much their costs decrease with a 30% decrease in silicon. CSIQ is trying to produce as much as possible while acheiving an acceptable profit margin that keeps investors happy. This emphasis on production over short-term profit is why their yoy growth in watts produced exceeds 2nd-place winner FSLR. Their primary goal seems to be to supply the world with massive amounts of good solar. I like that, especially for an industry that has no proprietary advantage. The CEO is basically a PhD solar techie, plenty wise in the financial things, and not playing games with anyone, let alone the market. They want to be the Chiquita of bananas. FSLR does too, but FSLR is less likely to install residential, basically killing 30% of their watts produced. FSLR also has little desire to vertically integrate, where CSIQ could make all its profit if it decides to squeeze out new players by reducing cell price to zero margin.

CSIQ does not have the contracts to support $1 billion this year.

Why Canadian Solar is the Best Solar Stock

In 2009, the indium report says there will be a shortage of 43 tonnes assuming 64 tonnes increase in non-ITO uses over 2007. The report does not give an estimate on future solar needs. 3 GW in 2011 will require 100 tonnes more than what they seem to predict, so it's 143 tonnes short (demand exceeding supply by 10%) in 2011 if the shortage remains about the same and if they are not sufficiently bullish on CIGS needs. Their charts do not go out to 2010 which is where I'm saying the problem could begin. Judging from their comments and graph, a 1% shortage caused a quadrupling of price. Their comparison to silver is absurd. The concentration that is in the Earth's crust is not related to minability. This type of reasoning is often use to make a false argument in metal discussions. The theoretically minable silver is 100 times more than the theoretically minable indium. The report shows that almost all increase in "production" is actually from LCD reclamation. There's only a 10% increase in virgin production from 2007 to 2009. The doubling of reclamation does not add up very well with the comment that reclamation is already at 60-65% of the 70% in LCD "targets" (waste). 100% reclamation only increases 35-40% of the 70% which is about 23% overall increase in reclamation instead of 100%. It's not a small discrepency since reclamation increase shown in their table is 90-95% of the total increase in supply. The difference is another difference of 25% between supply and demand. Although the table shows a great increase in reclamation, it does not show what happens when there is no more available efficiency increase in reclamation. That is, their table interestingly stops before the "end of the line" for significant indium reclamation increase...NEXT YEAR. The only valid point they make is that smelters can now afford to transport waste slag etc further from small producers. Most large producers already have it on site.

Why Canadian Solar is the Best Solar Stock

Purified indium already costs something like $2,000 per kg.

Although i agree with all your facts, i don't think they detract very much from my concerns. A likely scenario is that production goes up a little (eventhough it went down in 2007), LCD manufacturers find "good-enough" alternatives, and everybody pays a bit more. But in only 3 years there has to be massive changes in the indium world before CIGS can continue to grow.

I would be interested to know where sharp plans to get 50 tonnes of indium for 1 GW. That's 10% of the world supply. The LCD world in 2 yeyears will not allow that much to be sold for non-ITO uses. They'll need about one gram for a $800 TV? Whereas $800 of CIGS cells will need 5 to 20 grams. Solar cells might be important, but on a square foot basis, people think a big TV is more important, and will pay accordingly.

Why Canadian Solar is the Best Solar Stock

Jack, neither of my post were meant to promote or detract any stock. It's more like my doodling and musing over your article and wondering if FSLR needs to be so low and if CSIQ needs to be so high. I have 1.5% of my net worth in FSLR and 5% in solar. I recently divested myself from 10% net worth in oil and gold. Thanks to your article motivating me to look into CSIQ, i am considering switching to CSIQ. The CEO feb 2007 speech on the web site makes me like management as well as can be. Engineering, motivation, ethics, and long-term plan seem to be all in place as solid as a rock. Only new technology and disinterest in green can displace them.

ITO is using 84% of the world production. Poduction is 510 tonnes/year, leaving 80 tonnes for non-ITO. Being very generous to CIGS, ITO indium recovery could improve to keep up with bigger TVs eventhough demand from that sector is increasing 50% per year. There's already a shortage. Solar cells can't outbid big TVs, but can pay more for non-ITO indium. 80 tonnes means only 2 GW indium per year can be produced, enough for $2B in profits in 2010 for all CIGS companies. But the indium stops there. Recovery can improve only about 30% and CIGS at 1.5 um can theoretically get down to 20 tonnes per GW, so the indium might last until 2012 to make 8GW and $8B for the sector before hitting the indium wall. Indium is 100 ppm in zinc and you can't get it anywhere else. Indium accounts for 5% of a zinc producer's gross and maybe 15% of its profit. So if the price goes up another factor of 10 (which is supportable by both CIGS and ITO ...$0.10 per watt just for the indium), I guess you could flood the market with zinc just get to the indium and extend it even further. The theoretical max reserve base of indium with 100% recovery is 16,000 tonnes, theoretically enough for 1 TW, or $1 trillion in nansolar profits. But 5% of that disappeared into LCDs last year, given the so-so recovery. In 2010, 10% of the reserve base could go into LCDs, someday coming out for recycling.

Take your pick:

1) LCDs have to stop using so much, or
2) zinc plummets on indium going up a factor of 10, or
3) CIGS is idled by 2012 if not 2010.

Why Canadian Solar is the Best Solar Stock

OK, to correct some bad english: if supplies are going to be three higher than demand this year thanks to all these solar cell companies ramping up production, FSLR is in a good position (ignoring current high price) because it has the cheapest cells and largest profit margin. It sales could stay high, profit stay the same, while the sales and profit of everyone else plummets turns into massive quarterly losses. The 5% margin of CSIQ isn't reassuring in this scenario. We depend heavily on CSIQ's guidance on what they think they can sale and at what price, if we are to ignore the seeking alpha article that discusses too much supply in 2008.

Why Canadian Solar is the Best Solar Stock

The best-fit curve for FSLR growth for the past 5 years is 167% yoy. Multiply 2.67 times 2002 production and keep doing that until you reach 2007 and even into 2009 guidance, and it comes out right. 167% yoy. I did an article on it for seeking alpha. CSIQ has yoy revenue growth of 189%, best fit curve 2003 to 2008, and 220% for 2006 to 2008. But looking at their fact sheet, their gross profit from revenue has gone from 40% to 17% to 5% in the past 3 years. They hope for it to return to 14%. FSLR guidance is that their profit per revenue will stay close to 50% thanks to no competition with others who make this type of cell. CSIQ has revenue of $3.8 per total watt and FSLR has $2.40. Let's be optimistic and say CSIQ is returning to 14% profit per revenue, or $0.53 profit per watt verses FSLR's $1.3 profit per watt. So CSIQ has to produce and/or install and/or assemble 2.5 times more to match FSLR in profit. If CSIQ stays at 5% profit, it has to produce 7 times more. So it's not fair to compare just watt production.

If world demand is really three times lower than this year's production (according to another seeking alpha article). In excess supply, only the cheapest cells will be sold, killing everyone's profit except for the one (or two) company's that already have the cheapest cell. They will be able to retain their profit margin better. So it's not risk-free to invest in this Chinese company that has a Canadian name.

On the big plus side for CSIQ, if it acheives the 14% margin and equals FSLR watt production very soon as expected, then having a market capitalization 26 times less with profit/watt only 2.5 times less means it would have to be 26/2.5 = about 10 times higher to match the price of FSLR. At only 5% margin, it still has increase a factor of 3 to match FSLR price.

I can't believe anyone's still discussing CIGS when there's not enough indium in the world's minable crust to meet LCD needs in the next 5 years, let alone solar cells. I thought that pig was porked already.

Why Canadian Solar is the Best Solar Stock

Here's the fast money link:
www.cnbc.com/id/227348.../

She says she's talked about negatively repeatedly. Things like odd measuring sticks, nondisclosure, and the CEO owning half the stock.

I really wish seeking alpha would fix the awful programming: they have independent URLs or something for each image and they're loading seperately, even though it's the same image. Their pages, especially if there are any comments with the 3 little images next to the name, time, and date, cause really spooky things. One article had to load 300 freaking images, in addition to all the fetch and reply requests needed for each one, simply because people posted a lot of replies....but there are only needed to be 30 or so independent images with only one fetch and reply each to do the same thing. They must have paid a lot of money for someone to do such a bad job. Normal programmers can't do this bad if they tried.

Why Canadian Solar is the Best Solar Stock

SOLF was cited by the non-male on Fast Money to be the worst stock to put your money in. This Chinese company had a mysterious fantastic increase in profit and they will not disclose how much they are selling their cells for. She seemed to be saying it's a very questionable company. My impression is that no one knows what their profit or sales are.