UPDATED: Visit ourhttp://www.energyandcapital.com/resources/solar-energy-investments resource page for updated information on investing in the solar sector.
A record was set this week for the creation of the most efficient solar panel ever.
Researchers at the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) have successfully transformed 40.8% of the light that goes through their cell into energy.
To put that in perspective, SunPower’s 225 panels are the highest efficiency solar panels commercially available for residential use. They’re 18.1% efficient.
This illustrates just how far the solar industry has come, and how far it still has to go.
Just a few years ago we were hearing major announcements of 13%, 14%, and 15% efficiencies.
Now, with some R&D and a little investment, researchers are more than doubling the efficiency of the panels that are available commercially.
Rest assured, the technology currently in the lab will make its way to the production line. The industry will continue to mature, become more cost-efficient as well as more energy efficient, and reach the solar Holy Grail now known as grid parity.
Right now though, the top solar energy stocks underlying the industry are not fairing quite as well. There has been some money to be made on the frequent runs and rallies of late, but we really have seen a consistent rise from these stocks in some time.
Undoubtedly, the overarching cause for the current solar scenario is the credit and mortgage crises and the ensuing financial shakeout.
But there are some industry-specific problems that need to be discussed. Once those are out on the table, we can focus on our path to solar profits.
Solar Stocks: Short-Term Problems
Earlier this week, Forbes ran a story entitled, “The Great Solar Shakeout.”
The article was succinct and accurate, stating early on:
Despite expectations for rising sales, steadily growing demand over the long term, and another year of exuberant investment from venture capital, the solar bubble has been increasingly overdue for a correction and got a good one over the past month.
Indeed they have.
Solar energy stocks like SunPower (NASDAQ: SPWRA), First Solar (NASDAQ: FSLR), and Suntech Power (NYSE: STP) have lost about 50% of their value over the past three months.
That seems like a conundrum, given the rosy growth forecasts for the thin-film and crystalline silicon solar industries.
The Forbes article serves up a nice answer to that riddle:
Hidden behind these glowing [compounded annual growth rates] CAGRs is a mass of shadows, including the prospect of diminishing government subsidies, an oversupply of modules, rising materials costs and the freeze among credit markets. Combined, these factors help explain why solar stocks over the past 52 weeks and even in October, took a steeper dive than the Nasdaq Composite.
The chance of an oversupply of module and the credit freeze are the two main culprits in my opinion. The fear of diminishing government subsidies has diminished with the election of Barack Obama and the inclusion of tax extensions for solar in the bailout package passed in early October.
Solar Energy Stocks: Long-Term Benefits
What this means for the solar industry is just what the Forbes title implies: a shakeout.
Solar companies will be forced to lower prices to compete, and some smaller and credit-squeezed producers could be forced out.
In order to successfully invest in solar stocks, you’ll have to know which companies are best positioned to succeed in this climate.
And the climate isn’t all bad.
The silicon-based solar market is still expected to grow 38% annually through 2013, growing from a 550 MW market to a 2.8 gigawatt market.
The cadmium telluride (CdTe) market, which is the technology used by First Solar (NASDAQ: FSLR), is expected to keep pace, growing at a 37% clip through 2013 into a 2.4 GW market.
Even better, the thin film market based on CIGS and CIS, copper indium gallium selenide and copper indium diselenide, respectively, is expected to grow 96% annually into a 1.2 GW market by 2013.
The companies able to compete will be the companies able to succeed.
Top Solar Energy Stocks: Profitable Scenarios
A reduction in solar subsidies in Spain and Germany may lead to a slight constriction of the markets there. But, as mentioned earlier, the extension of solar tax credits here will serve to bolster the domestic market.
The $18 billion renewable energy incentives package, included in the bailout, offers a 30% rebate for residential and commercial solar installations. This will lead to expanded use of solar arrays here in the States, especially in jurisdictions that are already solar-friendly, like California and New Jersey.
What’s more, there’s a growing possibility that China will enact some form of solar subsidy that would significantly grow their market.
When this happens, you’ll want to be invested in the companies that continue to reduce their manufacturing costs by way of design improvement and economies of scale.
To take advantage, I’d be looking at the already established companies that are now trading at a discount.
First Solar and SunPower are probably good bets for a domestic market boom, while LDK Solar (NYSE: LDK) and Suntech look good for the Chinese market.
Next week, I’ll be releasing a new solar report that analyzes the solar market based on current and changing conditions. It will also recommend the five most promising solar companies for coming years, and include the investment details on how to capitalize.
But it’ll only be available to the savvy investors of the Alternative Energy Speculator.
You have the opportunity to get access to the report next week, but you can have access to it before it’s publicly released by signing up to my advisory today.
And you may want to hurry. It’s not just solar stocks that my readers are capitalizing on. We’ve closed two major positions for gains this week on an electric infrastructure company and water services company.
Don’t miss another day of the action.
Call it like you see it,
Nick
