The Hidden Impact Of Solar: Why You Should Care

Includes: FSLR, GE, HON, MMM
by: Matthew Frankel

I often get chastised by my readers for my love of, and belief in the solar industry. However, I completely understand that stand-alone companies (such as First Solar (NASDAQ:FSLR)) may not turn profitable without government help for some time. Many investors are simply not willing to wait for what could be decades to see a nice return on their investment. Others simply don't believe the solar industry is viable at all.

I still adamantly believe that solar power is the energy source of the future, more so than clean coal, nuclear, wind, geothermal, and fossil fuels combined. My reasons for this are too many to list here; however, please take a look at another article of mine that provides an in-depth argument of why solar will be the next big thing in energy.

What most investors don't know is how far into the market solar energy has an impact. More major companies than the average investor is aware of are delving into solar power. There are companies that are well-positioned to capitalize on their large R&D resources, manufacturing capacities, and cash flows to create a big presence in the alternative energy industry in the years to come.

One of the biggest companies involved in solar is 3M (NYSE:MMM). The company has been producing solar films for almost three decades now, and in 2009 formed a renewable energy division to expand its solar and wind programs. The same year, the company introduced its Solar Acrylic Foam Tapes, designed to help speed assembly, reduce cost, and improve durability of solar panel constructions. In 2010, the company introduced 3M Ultra Barrier Solar Film, as well as 3M Cool Mirror Film, a new optical film technology for low concentration, crystalline silicon photovoltaic installations. Last year, the company announced plans to build a manufacturing site for PV solar materials and renewable energy products in China, further investing its resources in this new industry.

General Electric (NYSE:GE) offers solar products and solutions for utility, commercial, and residential customers. These range from roof-integrated solar modules, all the way to large utility-scale power plant design. In spring 2010, GE announced it would be focusing development efforts on the thin-film solar PV market. GE may have competitive advantage over the companies more widely known for PV Panel production due to its size and strength. Customers are supported by GE's vast customer service network, which is a major feature that stand-alone solar companies simply can't match. GE also claims (on its website), that its PV panels will out-perform traditional PV in low-light and high-temperature applications.

Honeywell (NYSE:HON) has also entered the solar sector in several capacities. The company's Solar SmartGrid PV module is the world's first solar panel manufactured with an integrated AC module. They produce utility-grade 120 Volt AC power right out of the box. Because each panel's AC module is individually optimized at all time by the integrated electronics, the modules do not require uniform sun orientation, and are unaffected by shadowing issues on other panels. The system works like individual building blocks, and customers can install as little as one solar module, and add others as their budget permits. This could be a great competitive advantage as companies strive to make rooftop solar systems more affordable for the average consumer.

These companies represent a small fraction of the household names investing their time and money into solar power innovation. Knowledge of what is going on in the solar industry can give investors an advantage in timing investments into these three companies, and others with similar solar ventures.

Investors should particularly pay attention to conference calls and earnings releases of the major U.S. solar companies, like the aforementioned First Solar. Pay attention particularly to how well the company's products are selling, and how they plan on making their solar products more cost-effective in the future. The level of solar panel inventories is important too, as lower outstanding inventories translate to increased demand in the marketplace. With the recently imposed tariffs on Chinese solar companies, whose dumping of cheap solar panels into the U.S. market is a giant factor in the poor performance of solar stocks, now is the time to pay attention to how this is affecting U.S. solar companies, which now include some big names you probably already have in your portfolio.

Disclosure: I am long FSLR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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