Best of the Week
Most Popular
1.Putin’s World: Why Russia’s Showdown with the West Will Worsen - John_Mauldin
2. Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - Nadeem_Walayat
3. Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - Austin_Galt
4.Gold Price Golden Bottom? - Toby_Connor
5.Gold Price and Miners Soar on Huge Volume - P_Radomski_CFA
6.Stock Market and the Jaws of Life or Death? - Rambus_Chartology
7.Gold Price 2015 - EWI
8.Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - Nadeem_Walayat
9.Gold, Silver, Crude and S&P Ending Wedge Patterns - DeviantInvestor
10.Is the Gold And Silver Golden Rule Broken? - Michael_Noonan
Last 5 days
The Price Of Oil Exposes The True State Of The Economy - 27th Nov 14
Brazilian Bovespa Stock Market Technical Analysis - 27th Nov 14
Gold Price Would Soar on Possible Swiss Yes Vote - 27th Nov 14
Crude Oil Asset Bubble Trouble - 27th Nov 14
Thanksgiving and Puritan Geopolitics in the Americas - 27th Nov 14
The Dow Jones Stocks Index - Beautiful Tree in the Desert - 27th Nov 14
The Digital World, The Opiate of The People - 27th Nov 14
Harry Dent's Simple Strategy for Surviving Withdrawals from Markets on Crack - 27th Nov 14
Socialist France Just Cannot Compete Against Google Freedom - 27th Nov 14
A Short Tale About the Grand Manipulation of Crude Oil Prices - 26th Nov 14
China Secret Gold Buying ... How Could It Happen? - 26th Nov 14
Gold Price Spikes to $1,467.50/oz on Computer Glitch? - 26th Nov 14
Gold - So Bad It's Good: Surviving 2014 - 26th Nov 14
TrueShopping.co.uk Real Customer Experience Review - Online Shopping Lessons - 26th Nov 14
Is There A New Global Consensus About Cheating Investors To Reboot Employment? - 26th Nov 14
EUR/USD – Currency Bulls Don’t Give Up - 26th Nov 14
Swiss Gold Referendum A Golden Opportunity for Switzerland - 25th Nov 14
Silver: What COT Analysis Tells Us - 25th Nov 14
Stock Market Big, Bold and Ugly - 25th Nov 14
U.S. Dollar Near Top? Gold and Silver Trading, Platinum Breakout Invalidation - 25th Nov 14
Buy Fear - Easily Pick Up Profits on Stock Market Dips - 25th Nov 14
The Islamic State Reshapes the Middle East - 25th Nov 14
Gold Price Forecast 2015 - 25th Nov 14
The Swiss Referendum On Gold: What’s Missing From The Debate - 25th Nov 14
Clash of Generations - Why Millennials Still Live at Home; Not Jobs, Student Debt, or Housing - 25th Nov 14
Stock Market Reminiscent of Pompeii - 25th Nov 14
Once Upon A Time There Were Philosopher Kings - 24th Nov 14
The 2014 Crude Oil Price Crash Explained - 24th Nov 14
China Stock Investing - Follow the Money! - 24th Nov 14
122 Tonnes of Gold Secretly Repatriated to Netherlands - 24th Nov 14
What Causes the U.S. Dollar to Move? - 24th Nov 14
Stock Market Indexes New Highs - Will Uptrend Extend Even Further? - 24th Nov 14
All Hail the King U.S. Dollar - Trend Forecast - 24th Nov 14
Where Is China Economy On The Map Exactly? - 24th Nov 14
Most of The World Economies Panic - Is The US Next? - 24th Nov 14
Stock Market Exhaustion Gap? - 24th Nov 14
Gold Golden Gains Come After The Pain - 24th Nov 14
Crude Oil and Stock Market Setting The Stage For The Next Recession - 23rd Nov 14
This Publicly-Owned Bank Is Outperforming Wall Street - 23rd Nov 14
Who’s Ready For $30 Crude Oil Price? - 23rd Nov 14
Strategic, Methodological and Developmental Importance of Knowledge Consumption - 23rd Nov 14
Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - 23rd Nov 14
Gold Price 2015 - 22nd Nov 14
Stock Market Medium Term Top? - 22nd Nov 14
Is the Gold And Silver Golden Rule Broken? - 22nd Nov 14
Malaysia's Subsidy and Budget Deficit Conundrum - 22nd Nov 14
Investors Hated Gold at Precisely the Wrong Time: What About Now? - 22nd Nov 14
Gold and GLD ETF Selloff - 22nd Nov 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Gold Report 2015

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

© 2005-2014 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

Free Report - Financial Markets 2014