Best of the Week
Most Popular
1.U.S. Houses Prices Bull, Bear or Crash Ahead Into 2016? - Nadeem_Walayat
2.Gold Price Breakdown Forecast Downtrend to $1000 - Clive_Maund
3.USD, CAD, GBP, EURO,JPY and Gold Chartology - Rambus_Chartology
4.Silver Longs Still Vulnerable - Dan_Norcini
5.Get Ready for the Greatest Trade in History - William Patalon
6.Silver Price Looks Set for Breakdown - Clive_Maund
7.US Housing Market Bull, Bear or Crash Ahead? - 8Nadeem_Walayat
8.Gold and Silver Trading Alert: Silver Price and Its Signals - P_Radomski_CFA
9.Stock Market Caution as Greek Crisis Reaches Endgame - 1Christopher_Quigley
10.Gold And Silver - Elite NWO Checkmate? US Lacks Direction - Michael_Noonan
Last 5 days
Greece - Shoot the Dog and Sell the Farm - 29th June 15
Grexit?, BIS Warning, Chinese Market Crash & Systemic Risk Shake the Global Economy - 29th June 15
The New "Sharing Economy" May Not Be the Profit Bonanza Everyone's Expecting - 29th June 15
Gold and Silver Greece and Short Positions - 29th June 15
Volatility and Sleep-Walking Markets - 29th June 15
Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - 29th June 15
Stock Market More Decline Ahead? - 29th June 15
China Stock Market Crackup - The Final Trap Looms... - 29th June 15
Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - 28th June 15
Investor Stock Play for Two Growing Missile Threats - 28th June 15
Stock Market Uptrend/downtrend Inflection Point - 27th June 15
Greece Crisis OXI - 27th June 15
Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - 27th June 15
It’s Time to Change the Way You Look at Disney Forever - 27th June 15
Flatline Investing and Dead End Debt Schemes - 27th June 15
Stock Market Investors Avoid the "Herd" Like the Plague - 26th June 15
Extreme Gold/Silver Shorting - 26th June 15
USD Daily, Weekly, Monthly & Conclusions - 26th June 15
Gold Price Target of USD 2,300 - 26th June 15
Gold and Silver - Another Successful Option Expiration For the Insiders - 26th June 15
Why Buffett Bet A Billion On Solar Energy - 26th June 15
Fed Taper Talk, And The $10 Bill - 25th June 15
When a Bond Is Not a Bond - 25th June 15
Nature Rebounds - Trends in America Portend a Global Restoration of Nature - 25th June 15
Stocks That Profit... Even When You're Dead Wrong - 25th June 15
When Will US Debt Hit the Wall? - 25th June 15
Ron Paul Warns “They Can’t Print Money Forever” - 25th June 15
In Gold We Trust 2015: Gold Remains In A Secular Bull Market - 25th June 15
European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - 25th June 15
China Syndrome - 24th June 15
Greece - The Only Good Deal For Greece Is NO Deal - 24th June 15
Gold and Silver Price Headed for Breakdown - 24th June 15
Corporations vs. Entrepreneurship - 24th June 15
Sweet Spot for Gold Stock Investors - 24th June 15
It’s the World’s Most Powerful Investment Bank… and Now It’s Going to Work for You - 24th June 15
First Strike Capability - Gold or War - 23rd June 15
Greece / Stock Market Played Like a Bouzouki - 23rd June 15
Gold and Silver Forget Greece, Eyes On the Options - 23rd June 15
What Borders Mean to Europe - 23rd June 15
If You Have Money in a US Bank Account Be Aware! - 22nd June 15
The Most Dangerous Secret of Corporate America - 22nd June 15
Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - 22nd June 15
Euro Uncertainty Reflected in COT Report - 22nd June 15
Stock Market Crash Charts - 22nd June 15
Public Pensions: Live and Let Die - 22nd June 15
De-Greece-ing the Stock Market - 22nd June 15
GOLD: Will Summer 2015 Rally Mark A Cyclical Turning Point? - 21st June 15
The Twilight of Cash? - 21st June 15
Shanghai China Stocks Sink: Déjà vu 2001 & 2007…All Over Again - 21st June 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

The Untold Truth About Solar Power Stocks

Companies / Solar Energy May 01, 2013 - 11:51 AM GMT

By: Money_Morning

Companies

Dr. Kent Moors writes: The price of solar energy shares has been spiking, leading to the obvious parallel questions:

Is it sustainable?...Or what prospects exist for the average individual retail investor?

Before we address these questions, it would be best to lay some groundwork.


The increase in solar share prices has been just about across the board. This is most clearly seen in the rise in solar and related exchange traded funds (ETF). Guggenheim Solar (NYSEArca: TAN) has advanced 24.8% this past month, while American Vector Solar Energy ETF (NYSEArca: KWT) is up 15.2%. The iShares S&P Global Clean Energy Index (NasadqGM: ICLN) has improved 11.8%.

However, before you rush out and buy any of these ETFs, consider the longer view.

From December 1, 2012, TAN is down 36%, KWT is off 34.9%, and ICLN is weaker by 10.7%. The recent push up has resulted in some - apparently - better solar plays. Yet the medium-term perspective indicates the run up might not last.

Here's why...

In this case, sustainability is all about market position. Solar remains a niche energy source.

By the end of 2012, it accounted for only 1% of global energy consumption. Nonetheless, there have been some important developments that do provide some reason for optimism.

To begin with, the costs of solar cells and related material have come down dramatically. There have also been improvements in inverter technology, allowing thereby a cut in the energy lost when moving from direct current, which is how the power is generated, to alternating current, which is how that power is moved onto the grid and along to consumers.

The first is a mixed blessing to many in the industry, because it results from a massive undercutting of prices by Chinese companies. While that is allowing averages to go down, it likewise has resulted in significantly strained margins, bankruptcies, and production interruptions.

Solar also has been moving out of the realm of a subsidized energy to one that could become market competitive. Last month, Deutsche Bank issued a report - the fourth of its kind - which suggested that solar may reach grid parity as early as the first quarter of next year.

If ever there was a Holy Grail in the business, this is it.

Reaching grid parity essentially means that a source of energy is at about the same price as competing sources. Solar for some time has been criticized as being too expensive relative to other energies. Without continuing government subsidies, this argument runs, it would not be able to survive in the market.

Some residential subsidies survive, but the largest for new projects expired in the U.S. and the European Union at the end of last December. The strain on share prices in the first quarter of this year was a clear reminder of the end of such support.

Then there was an unexpected development: In several parts of the world, conventional electrical generation became more expensive for a range of reasons while the effective cost of solar was coming down.

Before the end of last year, solar reached grid parity in Hawaii, and it's on track to accomplish the same before the end of this year in Italy, Australia, and Brazil.

Depending on how one reads loads and distribution, there are claims that grid parity may occur for California (or at least parts of the state) in 2014.

Additionally, proponents of solar also point out that, factoring in "external" costs - especially those to the environment - solar is already at grid parity in most of the United States.

Should we then begin to look seriously at solar as a growth area for investment profit? Are these stocks finally going to be moving up on a regular basis?

Not so fast.

I am still of the opinion that this is going to be a very rocky ride - with some significant shortfalls approaching.

The primary problem involves integrating some rather heavy multi-year capital infusions required for generation and distribution infrastructure.

And there are still noticeable problems resulting from at least a third of the power generated being lost back to the atmosphere. Furthermore, there is still a massive loss of electricity when moving harvested power from the photovoltaic cells to the feeder lines for transit.

Most importantly, however, the industry needs to move from being a residentially-focused energy provider. That market has some expansion in it, but it cannot - by itself - save the sector. Germany has been learning this lesson over the past year, as expectations for solar and wind taking over for nuclear have fallen short.

What is necessary is a transition to utility-scale projects, despite the inherent problems in project cost that initially entails. And here, the recent success of a leading company is worth mentioning.

First Solar, Inc. (NasdaqGS: FSLR) is the dominant American solar energy provider. Not too long ago, the company was almost exclusively pushing out roof panels. Then it was undercut by cheaper production from China, and suffered an extreme price contraction.

The company has now moved into the utility side of solar. A knockout quarterly report has catapulted the stock. FSLR has risen 64.4% in the past month - although it is still 56% lower that it was 18 months ago.

First Solar, and the sector as a whole, is now overheated and there is a price decline coming. In the absence of major contracts in areas other than residential, we may witness a contraction in short order.

I am not persuaded that solar will make it without continued subsidies and government support.

But this may yet be the beginning of something interesting.

Source :http://moneymorning.com/2013/05/01/the-untold-truth-about-solar-stocks/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History