logo  
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

The Myth of Solar Stocks as a Monolith

By  +Follow October 31, 2013 6:58AM
Share:
Tickers Mentioned:

Anyone who takes even a passing interest in the stock market is probably aware that 2013 has been the year of solar, with the Guggenheim Solar Trust ETF ($TAN) climbing nearly 135 percent so far this year. Of course, as much as this year has been the year of solar, the last two years weren’t, with the Solar Trust plummeting almost 80 percent from the start of 2011 to the end of 2012.

Solar remains a new industry, relatively speaking.  While the first solar modules date all the way back to 1958 when they were installed on space ships, it’s only started catching on as a serious alternative for generating electricity in the last few years. In fact, over 66 percent of global solar capacity has been installed in the last two and a half years. And capacity is expected to double in the next two and a half years.

And, as with most relatively new technologies, there’s a tendency for the stock market to treat the industry as a monolith, with daily moves for one or two major solar company creating a ripple effect across the entire segment. If SunPower Corporation (SPWR) or First Solar (FSLR) make a big move, it’s not uncommon to see other, smaller companies moving in a similar direction for no other apparent reason than that they’re mirroring the industry leaders. And while many of the companies are subject to similar market forces, that doesn’t mean that it makes sense to treat them all the same. The solar industry has multiple facets, with residential installations representing a market totally unique from utility customers, and different technological underpinnings to the offerings of different companies.

A Growing Source of Power

The biggest factor driving the recent growth of the solar industry appears to be primarily the rapid increase of solar installations for utility companies. In fact, solar is set to outpace wind power in new installations this year for the first time. Driving this is a steady improvement in the efficiency of solar panels paired with large-scale government support in the United States and China. And, ultimately, utilities have represented the biggest portion of the solar market for years.

The portion of total photovoltaic (PV) cell capacity for utilities is on the rise. In fact, Q4 of 2012 saw a massive spike in installations, reaching nearly 900 MW for the 3-month period. What’s more, while there remains seasonal fluctuation, utilities are driving the majority of new solar installations in America, something that represents a dramatic shift from even just a few years ago. It wasn’t until Q4 of 2010 that installations exceed 200 MWs total for the first time, and utilities represented only a fraction of that.

Photovoltaic Panels vs. Concentrating Solar Power

When one looks at the use of solar power by utilities, there’s an important distinction to be made: photovoltaic panels (PVs) vs. concentrating solar power (CSP) plants. Solar panels are typically silicon-based panels that convert the radiated energy from the sun into electricity directly. Concentrating solar power is much more coneventional in the sense that it uses heat to create steam that, in turn, powers turbines, just like any fossil-fuel fired plant. However, in this case, the heat is coming from the sun. Plants using CSP will concentrate sunlight onto a singular point, creating the heat that’s then used to power the turbines. About 90 percent of global CSP capacity comes in the form of parabolic trough plants, which use curved mirrors to focus the sun’s heat onto a pipe in the middle which contains a working fluid (like molten salt), which is super-heated and used to heat water, create steam, and power turbines.

The United States has lagged well behind Europe in installing CSP plants, with Spain leading the way with an expected 1.8 GW of capacity to be in place by the end of 2013. The United States, though, is rapidly closing that gap. For 2013, installations of PV power are on pace for 4.4 GWs as compared to just 912 MWs of CSP capacity. However, this is 912 MWs more CSP getting installed than in 2012, when there was no CSP capacity added in the United States. That should bring American capacity to over 1.5 GW by the end of 2013. But that’s just the start. Contracts have been signed for the construction of at least another 6.2 GWs of capacity.

Residential vs. Non-Residential

While the increase in solar power utilities is the biggest factor driving the exploding solar capacity in the United States and abroad, there’s a growing interest in residential installation. Solar panels on rooftops allow consumers to reduce their power bill and, in some cases, even sell power back to the grid. It’s become a major concern for utilities companies, which have mounted anti-home solar campaigns in Arizona and California.

However, the widespread availability of home solar systems appear to be a trend that utility companies will have difficulty reversing. In the state of California alone, over 150,000 roofs have solar installations with a total capacity exceeding 1.5 MW. What’s more, steadily rising rates of residential installations were beginning to approach 200 MW every quarter by mid-2013, and should continue after California’s state legislature passed key legislation this September with protections for the rooftop solar industry. In the meantime, company’s like Elon Musk’s SolarCity (SCTY) appear to be poised to benefit from the growing industry.

Different Technology

Even within the subset of PV cells, a variety of different technologies are in play. And while some might be tempted to overlook these differences, one should remember the story of Solyndra. Solyndra, which became the symbol of everything that’s wrong with the world for any number of conservative pundits after its 2011 bankruptcy, went out of business because it gambled big on its ability to build a solar panel using less refined silicon than its competitors. This was a solid plan. Until the price of refined silicon plummeted. Suddenly, Solyndra’s panels were significantly more expensive than the competition, and the company rather abruptly went from “wave-of-the-future” to “wave-of-criticism-over-chapter-11-filing.”

While the details of solar cell technology are considerable, on a basic level, there are two types of technology used with solar cells. The first are manufactured using crystalline silicon, the second are known as thin-film solar cells, which are heavier because they use more glass but require less silicon. Each of these two groups break down further, with the differentiation based on the size and type of silicon crystals or the materials used to make the thin films in question.

China vs. the United States

Finally, knowing what country is producing solar cells is crucially important. Currently, the United States and China are responsible for producing the majority of the world’s solar panels, and the two countries are locked in an ongoing trade war. Much of the crash in the solar market in 2011 was driven by a glut of cheap Chinese-made panels hitting American markets and driving down the price of panels around the globe. American makers accused the Chinese companies of relying on significant government price supports, which prompted the United States to slap tariffs on Chinese panels. This, in turn, led China to slap its own duties on imported polysilicon from the United States. Now, as everyone seems to be making money again, the situation appears to have cooled some, but it doesn’t change the fact that the solar market as a whole tends to rely heavily on government support, at home and abroad.

Investing in Solar

Precisely what sort of solar play one wants to make is entirely dependent on the investor, and one’s personal research is what ultimately matters. However, assuming that all solar companies are alike is a mistake that could easily land one in hot water. While it may not be out of the question to assume that the market will remain largely ignorant and continue treating solar companies like a monolith, it’s more likely that as capacity continues to skyrocket, investors will become wiser and differentiation between companies will start to shake out.

If/when this happens, a savvy investor looking to invest in solar should have done their research, digging into each company and examining things like what sort of panels they’re making, what sort of customers they’re selling them to, and what sort of support their country’s government is offering them.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.

The author does not hold a position in any of the securities listed above.


Liked What You Read? Join Equities.com as a contributor and get eyeballs on your content FOR FREE!

Results for FSLR
MarketMaykur
17 Dec 14 21:07:21
RT @MajorLtrading: $FSLR on long watch http://t.co/Am0m5eIWOM
Klaus Daimler
17 Dec 14 21:00:58
$FB-110 $RH-130 $WWAV- 45 $GNC -65 $FINL-45 $GT-35 $HTZ-45 $SODA-38 $TRN-45 $DVN-80 $HAL-55 $SLB-100 $SPWR-50 $FSLR-75 $SUNE-32
Klaus Daimler
17 Dec 14 20:48:30
Fab 5 designed to add 5 to $FB $RH $WWAV $GNC $FINL $GT $HTZ $SODA $TRN $DVN $HAL $SLB $SPWR $FSLR $SUNE for max exposure post correction.
Cheyenne Settle
17 Dec 14 20:29:37
Bearish or Bullish on these #stocks $OII $FSLR $NEU $USD #investing http://t.co/lP6KbV6g5w
Tim Susoev
17 Dec 14 20:21:16
RT @KDaimler: $FSLR $SPWR $SUNE all long term bets. Vol from oil hurting them very short term. Add the dips.
Klaus Daimler
17 Dec 14 20:20:16
$FSLR $SPWR $SUNE all long term bets. Vol from oil hurting them very short term. Add the dips.
MajorLeagueTrading
17 Dec 14 20:13:02
$FSLR on long watch http://t.co/78iscEaGjx
MajorLeagueTrading
17 Dec 14 20:12:22
$FSLR on long watch http://t.co/Am0m5eIWOM
Shark Feed
17 Dec 14 20:12:22
$FSLR on long watch http://t.co/YFv8Sxh3XD
MarketMaykur
17 Dec 14 20:11:31
$FSLR on long watch http://t.co/yUyeUYQ3Ky
danielo
17 Dec 14 20:10:10
RT @PipsToDollars: $AAPL $KO $EMC $TSLA $CAT $FSLR $PEP all show extreme oversold conditions and are ripe to move up later in the week.
Shaquita Foy
17 Dec 14 19:27:54
Are you Bearish on these #stocks $BPOP $FSLR $CLWR $BWP #investing http://t.co/hxY9z4ueV5
Captain James Burke
17 Dec 14 19:25:05
RT @_JohnWalsh_: 18/12/14 Short Watch List $AEM $AWAY $CPA $FSLR $GES $HLF $JOY $MPEL $SEAS $SLH $SSYS $TEX $TMUS $TUP
Alesia Quick
17 Dec 14 19:24:17
Are you considering buying $HD $TIBX $FSLR $CAG #personalfinance http://t.co/GMBKPojrEM
Alex K
17 Dec 14 19:23:56
RT @_JohnWalsh_: 18/12/14 Short Watch List $AEM $AWAY $CPA $FSLR $GES $HLF $JOY $MPEL $SEAS $SLH $SSYS $TEX $TMUS $TUP
John Gavin
17 Dec 14 19:16:01
Undisclosed SEC Investigation of First Solar is Now Over $FSLR http://t.co/ad1VFtKb1L
Roxann Bayer
17 Dec 14 19:06:23
Find the next hot #pennystock $FSLR $RHI $DISCA $S #liquidity http://t.co/v2HIfVdRHz
Katheleen Ventura
17 Dec 14 19:00:36
Get Free research on $OHI $VLO $FSLR $CSIQ #Stock http://t.co/IfAjC6r2sI
Hae Forman
17 Dec 14 19:00:35
Are you thinking of Investing in $HME $FSLR $RKT $BWP Must see http://t.co/MPoaCADtTo
Confucius Trades
17 Dec 14 19:00:22
A brighter future: five ideas for solar power (via @cnn) $FSLR $SCTY $VSLR $CSIQ $TSL http://t.co/DaZOMWdmhK
Rozella Huffman
17 Dec 14 18:56:38
$FSLR Insider Trading updates on $INCY $FOSL $PCLN #wallstreet http://t.co/ye2VUxUclJ
BlackCabbieTrader
17 Dec 14 18:35:59
18/12/14 Short Watch List $AEM $AWAY $CPA $FSLR $GES $HLF $JOY $MPEL $SEAS $SLH $SSYS $TEX $TMUS $TUP
OTPicks.com
17 Dec 14 18:19:28
http://t.co/NYsxQOU64w DennyT: CSCO Interactive Chart $CSCO $FSLR $AMAT $XIV: DennyT http://t.co/rDMqXQM3yi http://t.co/NYsxQOU64w
OTPicks.com
17 Dec 14 18:19:26
http://t.co/QkCFZ8YF3c DennyT: CSCO Interactive Chart $CSCO $FSLR $AMAT $XIV: DennyT http://t.co/cWjqnhgvB8 http://t.co/QkCFZ8YF3c
Rozella Huffman
17 Dec 14 18:13:19
Are you considering selling $HTA $FSLR $MCY $GAIN View now http://t.co/AtZW9EDgQF
Dana Mcginnis
17 Dec 14 18:12:39
Get #Pennystock Research on $ALXN $FLIR $FSLR $PCLN #moneymanagement http://t.co/rvUhZcG3dq
Thuy Espinal
17 Dec 14 18:08:41
Are you Bullish on these #stocks $WY $FSLR $QEP $FB #wealthmanagement http://t.co/r4nXyML5OJ
Lanelle Fultz
17 Dec 14 18:07:24
Are you thinking of Investing in $FSLR $EL $HTZ $YOD #wallstreet http://t.co/BFZY66czbH
Juan Beyer
17 Dec 14 18:00:19
Are you hanging on to $PCL $FSLR $PBCT $TRLA #investing http://t.co/knyRyGOB69
Fabian Coyne
17 Dec 14 17:43:10
$FSLR Buying or selling? $PNC $ISRG $NUAN Goto http://t.co/uRJ0B5QFsZ
Necole Diaz
17 Dec 14 17:34:32
Great #Stock Newsletter you must have $ASBC $FSLR $INTC $DF Must see http://t.co/8zEme7iWJk
Zackery Hardesty
17 Dec 14 16:43:30
Regretting your investment in $ACM $FSLR $BWA $AAPL Try this http://t.co/0iD0n7UK9W
Bertha Diaz
17 Dec 14 16:20:36
Latest information on #stocks like $RLGY $AVP $FSLR $LGND #newsletter http://t.co/WqHmtnY6r1
Norman Ogle
17 Dec 14 16:03:30
$CMA Top Performing #Stocks today $ZBRA $FSLR $RT I suggest http://t.co/lfEuRpnM1s
Dangelo Cadwell
17 Dec 14 15:28:32
Insider Trading alerts on $FSLR $RHI $CST $CSIQ #financial http://t.co/dJBzv8Kp2i
Frank Cesare
17 Dec 14 14:49:42
$TWTR o/u 35 or 36, $FB o/u 75 or 76.34, $AAPL o/u 108 or 110.47, $FSLR o/u 41.50 or 42.36, $GILD o/u 101 or 103
Henrietta Major
17 Dec 14 14:41:24
Todays movers to research $AGO $FSLR $DO $CBM #liquidity http://t.co/glYitXUfRf
Stockaholics
17 Dec 14 14:34:58
Platinum Memberships Rose, After 528% Gains On Penny Stocks, In One Month! Big Update: http://t.co/2W3yKD2d5Q $ACAD $ROYL $FSLR
StockGuesser1
17 Dec 14 14:25:24
Nice First Solar win http://t.co/fMOgDPXKjP $FSLR
Apple Stock News
17 Dec 14 14:02:00
Stock Market Prediction Algorithm: Up To 44.79% Return In 3 Months http://t.co/dxxLflN9oY #advisors #stocks $X $FSLR
I Know First
17 Dec 14 14:02:00
Stock Market Prediction Algorithm: Up To 44.79% Return In 3 Months http://t.co/DOpcJDtOTe #advisors #stocks $X $FSLR
я знаю первым
17 Dec 14 14:00:41
Stock Market Prediction Algorithm: Up To 44.79% Return In 3 Months http://t.co/Jneh2mwrkH #advisors #stocks $X $FSLR
Currency-prediction
17 Dec 14 14:00:41
Stock Market Prediction Algorithm: Up To 44.79% Return In 3 Months http://t.co/bXDkdyQ4hD #advisors #stocks $X $FSLR
I Know First: Brasil
17 Dec 14 14:00:41
Stock Market Prediction Algorithm: Up To 44.79% Return In 3 Months http://t.co/v9YCXqkMKQ #advisors #stocks $X $FSLR
Gold-prediction.com
17 Dec 14 14:00:41
Stock Market Prediction Algorithm: Up To 44.79% Return In 3 Months http://t.co/OCSjQJEmKk #advisors #stocks $X $FSLR
IKnowFirst Research
17 Dec 14 14:00:41
Stock Market Prediction Algorithm: Up To 44.79% Return In 3 Months http://t.co/Cs6UtXDe1G #advisors #stocks $X $FSLR
I Know First UK
17 Dec 14 14:00:28
Stock Market Prediction Algorithm: Up To 44.79% Return In 3 Months http://t.co/gezrxzguoa #advisors #stocks $X $FSLR
I Know First
17 Dec 14 14:00:28
Stock Market Prediction Algorithm: Up To 44.79% Return In 3 Months http://t.co/OsDpakJVQF #advisors #stocks $X $FSLR
Asha Carvalho
17 Dec 14 13:49:39
Whats going on with $NUE $WPX $FSLR $BWP Visit http://t.co/T7NrSNFxWz
HumanNature
17 Dec 14 13:29:37
RT @SwingTradeAlert: IBD:Solar Stocks Dive With Oil Prices; CEOs See No Link http://t.co/W1HtKpM3iy $SCTY $FSLR $SPWR $SUNE http://t.co/a5F…
				
				
By  +Follow October 31, 2013 6:58AM
Share:

Comments

 

blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.