What Will Kill Today's Solar Companies?

by: Dana Blankenhorn

What will kill today's solar companies?

It's not what you think.

What you think is probably what the CEO of Trina Solar (TSL) thinks, that there is an inevitable “shake out” going on that will drive most companies under, leaving a small number of stronger players.

This assumption is based on a fallacy, that solar technology is settling down, that we know what solar power looks like, and how it's made.

We don't. The next generation of systems will be made quite differently from today's, and will be twice as efficient as what you can buy now. Some data points:

What the current Chinese “dumping” of old solar technologies has done is put a ceiling on costs for the next generation of equipment, which may be quite different from what we now have, both in how it's designed and how it's made.

This means the size advantages claimed by Trina and other Chinese panel makers are not terribly relevant to the market of 2013. There is ample opportunity for U.S. makers to enter the market and succeed.

But here's the bad news for investors. The new generation of gear, doubling efficiency, lowering costs, probably won't make solar the “cheap power” against natural gas, and will take some time to scale.

For that we need to wait for yet-another generation of new technologies to emerge from labs. I'm still guessing 2016 for the crossover. It's only when solar becomes the cheap energy that the makers of gear become the place where investors want to play.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.