Best of the Week
Most Popular
1.U.S. Inner City Turmoil and Other Crises: Ron Pauls Predictions for 2015 - Dr_Ron_Paul
2. What’s In Store For Gold Price in 2015? - Ben Kramer-Miller
3.Crude Oil Price Ten Year Forecast to 2025: Importers Set to Receive a $600 Billion Refund - Andrew_Butter
4.Je ne suis pas Charlie - I am not Charlie - Nadeem_Walayat
5.The New Normal for Oil? - Marin_Katusa
6.Will Collapse in Oil Price Cause a Stock Market Crash? - OilPrice.com
7.UK CPI Inflation Smoke and Mirrors Deflation Warning, Inflation Mega-trend is Exponential - Nadeem_Walayat
8.Winter Storms Snow and Wind Tree Damage Dangers, DIY Pruning - Nadeem_Walayat
9.Oil Price Crash and SNP Independent Scotland Economic Collapse Bankruptcy - Nadeem_Walayat
10.U.S. Housing Market Bubble 2.0 Meet the Pin - James_Quinn
Last 5 days
Saudi Arabia Changes Kings, But Not its Oil Policy - 29th Jan 15
Crude Oil Price Bulls vs. Resistance Zone - 28th Jan 15
Acceleration Of Events With Rising Chaos – US Dollar Death Foretold - 28th Jan 15
The Fed and ECB Take the West back to when the Rich Owned Everything - 28th Jan 15
Washington's War on Russia - 28th Jan 15
Cyber War Poses Risks To Banks and Deposits - 28th Jan 15
Lies And Deception In Ukraine's Energy Sector - 28th Jan 15
EUR, AUD, GBP USD – Invalidation of Breakdown - 28th Jan 15
“Backup-Camera Envy” Is Driving This Unstoppaple Investment Trend - 28th Jan 15
The Great "inflated" Expectations for Gold, Oil, Commodities -- and Now Stocks - 28th Jan 15
How to Find the Best Offshore Banks - 28th Jan 15
There’s More to the Gold Price Rally Than European Market Fears - 28th Jan 15
Bitcoin Price Tense Days Ahead - 27th Jan 15
The Most Overlooked “Buy” Signal in the Stock Market - 27th Jan 15
Gold's Time Has Come - 27th Jan 15
France America And Religious Terror War - 27th Jan 15
The New Drivers of Europe's Geopolitics - 27th Jan 15
Gold And Silver - Around The FX World In Charts - 27th Jan 15
It’s Not The Greeks Who Failed, It’s The EU - 27th Jan 15
Gold and Silver Stocks Investing Basics - 27th Jan 15
Stock Market Test of Strength - 26th Jan 15
Is the Gold Price Rally Over? - 26th Jan 15
ECB QE Action - Canary’s Alive & Well - 26th Jan 15
Possible Stock Market Pop-n-drop in Store For SPX - 26th Jan 15
Risk of New Debt Crisis After Syriza Victory In Greece - 26th Jan 15
How Eurozone QE Works: A Guide to Draghi's News - 26th Jan 15
Comprehensive Silver Price Chart Analysis - 26th Jan 15
Stock Market More Retracement Expected - 26th Jan 15
Decoding the Gold COTs: Myth vs Reality - 26th Jan 15
Greece Votes for Syriza Hyperinflation - Threatening Euro-zone Collapse or Perpetual Free Lunch - 26th Jan 15
Draghi's "No-growth" QE Money for Stocks, Zilch for the Economy - 25th Jan 15
Unjust and Undeclared Wars - 25th Jan 15
The European Central Bank Commits Monetary Suicide - 25th Jan 15
Stock Market ECB EQE week - 25th Jan 15
Gold And Silver Timing Is Most Important Element - 25th Jan 15
The Best Way to Invest in the Next Alibaba Internet Stock IPO - 25th Jan 15
The Outpatient Surgery Business Rains Cash into Healthcare Stocks - 25th Jan 15
Stock Traders Flock to Gold GLD ETF - 24th Jan 15
10 Reasons Why You Need an Offshore Bank Account - 24th Jan 15
Goldman Sachs Blankfein - Regulation is Like Background Noise - 24th Jan 15
Gold in Euros Surges As ECB To Print Trillion Euros and Greek Election This Sunday - 24th Jan 15
Gold Bear Market Rally or New Bull ? - 24th Jan 15
Euro-zone 'QE already Working' Says IMF Lagarde - 23rd Jan 15
ECB and EU LTRO and QE for Dummies: Or, Make These Trades - 23rd Jan 15
Debt and Deflation: Three Financial Forecasts - There's More Than Falling Prices - 23rd Jan 15
Market Should Not Doubt' Mario Draghi ECB QE - 23rd Jan 15
Francs, Bonds, Barrels, and Bail-Ins - 23rd Jan 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

State of US Markets 2015 Report

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