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
MaximusWWE
1 Feb 15 01:13:20
RT @elitewealthmgmt: Following the crash in energy prices? Which companies do you think will come out ahead? http://t.co/InmKAGj5IH $DVN $F…
suriNotes
31 Jan 15 16:44:16
$FSLR in Symm. Triangle Pattern http://t.co/UoOt75FlPc
Frank Cesare
31 Jan 15 16:19:30
$FSLR wanna see this one test and hold 41.06 for a potential move back to 41.85, 42.80 and 44.29.
Bret Jensen
31 Jan 15 15:37:54
RT @valuewalk: Hedge Fund Crowding Costs – A Look At SanDisk http://t.co/g1gGMYCEEo $SNDK $FSLR $TEL $PLUG $GLW $CREE $KN http://t.co/Bv…
ValueWalk
31 Jan 15 15:23:18
Hedge Fund Crowding Costs – A Look At SanDisk http://t.co/g1gGMYCEEo $SNDK $FSLR $TEL $PLUG $GLW $CREE $KN http://t.co/BvTGH96dln
Rosner Stocks
31 Jan 15 15:16:11
$EWZ Company Info Updated Saturday, January 31, 2015 5:59:21 PM $GE $FSLR $SWKS $ACT http://t.co/EpTEldzGHZ
PolgarStocks
31 Jan 15 15:16:04
$FXI News Updated Saturday, January 31, 2015 6:07:31 PM $TVIX $EA $XOP $FSLR http://t.co/8h0u7V4QHe
IH News Desk
31 Jan 15 15:15:10
$DIS Reviews Updated Saturday, January 31, 2015 5:11:40 PM $XLI $FSLR $FNMA $BLTA http://t.co/qJhgi0IpnH
IH News Desk
31 Jan 15 15:15:07
$SDS Filings Updated Saturday, January 31, 2015 5:11:40 PM $FSLR $QID $XLK $HAR http://t.co/tkR8q9lwVh
Langan Stocks
31 Jan 15 13:53:41
$GENE Financials Updated Saturday, January 31, 2015 4:03:30 PM $BIB $CHL $ERY $FSLR http://t.co/JY7PAVfsBB
Langan Stocks
31 Jan 15 13:53:39
$HAR Stock Price Updated Saturday, January 31, 2015 4:03:30 PM $FSLR $SOXL $DUST $HAL http://t.co/EiIkIkn768
PolgarStocks
31 Jan 15 13:14:13
$SCO Stock Forum Updated Saturday, January 31, 2015 4:07:37 PM $UA $VRX $FSLR $SVXY http://t.co/GpowSkFsE6
IH News Desk
31 Jan 15 13:14:05
$V Investor Opinions Updated Saturday, January 31, 2015 3:11:39 PM $BIIB $FSLR $XLK $KO http://t.co/Bgu05xiRhU
Langan Stocks
31 Jan 15 12:53:09
$FSLR Opinions Updated Saturday, January 31, 2015 3:03:29 PM $NBG $XLF $GILD $IYR http://t.co/ILAhx6FrJx
Langan Stocks
31 Jan 15 12:53:07
$ZA Investor Opinions Updated Saturday, January 31, 2015 3:03:29 PM $F $SBUX $FSLR $CXDC http://t.co/EQasoLhMCX
PolgarStocks
31 Jan 15 11:12:14
$QLD Reviews Updated Saturday, January 31, 2015 2:07:33 PM $FSLR $IMSC $AMAT $XHB http://t.co/8AmG2xAaSj
PolgarStocks
31 Jan 15 11:12:10
$AMAT Short Sales Updated Saturday, January 31, 2015 2:07:33 PM $BP $FSLR $UUP $AAPL http://t.co/ucmLwaIE7m
IH News Desk
31 Jan 15 11:12:05
$FSLR Company Info Updated Saturday, January 31, 2015 1:11:41 PM $HA $RGDO $EWJ $UCO http://t.co/6EhQxg7daz
PolgarStocks
31 Jan 15 10:11:06
$TLT Short Sales Updated Saturday, January 31, 2015 12:07:36 PM $BAC $RGDO $NFLX $FSLR http://t.co/gaFNaiNlhK
Rosner Stocks
31 Jan 15 09:11:38
$TSLA News Updated Saturday, January 31, 2015 11:59:20 AM $XLB $MINE $TWM $FSLR http://t.co/wNl65ACUjc
IH News Desk
31 Jan 15 09:11:08
$FSLR Percent Change Updated Saturday, January 31, 2015 11:11:55 AM $INTC $IEV $CELG $FXA http://t.co/c0fnQdtZ1U
Gennady Kupershteyn
31 Jan 15 08:20:14
112 Short trading ideas breaking down. http://t.co/0NTAekdHIF $VALE $RIO $MT $SCTY $FSLR $SPWR $MTW $DDD $CBI $F $TSLA $WYNN $LVS $MU
IH News Desk
31 Jan 15 07:07:36
$XLF Percent Change Updated Saturday, January 31, 2015 09:11:50 AM $FSLR $RYE $ELTP $CSII http://t.co/hRYLourakL
IH News Desk
31 Jan 15 06:07:15
$FSLR Short Sales Updated Saturday, January 31, 2015 08:11:48 AM $INVN $MO $NBG $ICPT http://t.co/tP6zpLlRVP
IH News Desk
31 Jan 15 05:06:17
$FSLR Filings Updated Saturday, January 31, 2015 07:11:52 AM $GDXJ $EPI $CTIC $BIIB http://t.co/s3D0WoBhMI
Langan Stocks
31 Jan 15 04:46:36
$XLE Percent Change Updated Saturday, January 31, 2015 07:03:35 AM $ACT $FSLR $ICPT $GRCU http://t.co/LntcBER8WA
Rosner Stocks
31 Jan 15 04:07:15
$EWZ Investor Opinions Updated Saturday, January 31, 2015 06:59:27 AM $FSLR $TBT $VWO $MCD http://t.co/0WpHH37y2e
IH News Desk
31 Jan 15 03:05:06
$XLP Last Price Updated Saturday, January 31, 2015 05:11:49 AM $ZA $RAX $SBUX $FSLR http://t.co/1VE0ySudMa
IH News Desk
30 Jan 15 20:58:37
$DIS Investor Opinions Updated Friday, January 30, 2015 11:11:48 PM $FB $JBLU $OCN $FSLR http://t.co/zMiGJ4264S
PolgarStocks
30 Jan 15 20:56:35
$FSLR Financials Updated Friday, January 30, 2015 11:07:41 PM $VLO $HIMX $XRT $SMH http://t.co/j7Zb4pJfpE
Maleah
30 Jan 15 20:26:03
http://t.co/tdDPA62UeP <-- how to escape the 9-5 grind by learning to stock trade, knowledge is power $RUSS $UGAZ $OIL $FSLR $NFLX
IH News Desk
30 Jan 15 19:58:22
$FEYE Reviews Updated Friday, January 30, 2015 10:11:50 PM $EWJ $FSLR $AAPL $EWJ http://t.co/Voan0KZEQ0
PolgarStocks
30 Jan 15 17:54:09
$AAPL Reviews Updated Friday, January 30, 2015 8:07:41 PM $CSCO $FSLR $SOXL $CELG http://t.co/BzOcFCpXnS
Stock Rocket
30 Jan 15 17:46:34
Our Penny Stock Picks Gained an overall 160% This Week! New Picks Coming: http://t.co/vJR8lXzozx $ACAD $ROYL $FSLR
ProVesting
30 Jan 15 13:16:03
$FSLR $SCTY $VSLR: Record-Breaking Solar Growth In Latin America Presents Massive ...: http://t.co/dBtausEOIA
Quantpost Technology
30 Jan 15 13:10:05
$FSLR $SCTY $SPWR $SUNE News: "Record-Breaking Solar Growth In Latin America…" http://t.co/EYdwifL4Yg Board view: https://t.co/B0x6kWhXIU
Seeking Alpha
30 Jan 15 13:10:02
Record-Breaking Solar Growth In Latin America Presents Massive Opportunities http://t.co/XhwC3EqB1k $CSIQ $FSLR $SCTY $SPWR $SUNE $TSL
The God of Trading
30 Jan 15 12:36:59
@grist Yes, except stocks need #MarketTiming. Buy and hold while the sun shines (see the chart). $TAN $FSLR $SPWR http://t.co/Q6BFaXDqzR
Langan Stocks
30 Jan 15 12:34:45
$HIMX Opinions Updated Friday, January 30, 2015 3:03:34 PM $CSCO $SH $FSLR $FXC http://t.co/WqsWeA7Zfi
IH News Desk
30 Jan 15 11:52:21
$VXX Stock Message Board Updated Friday, January 30, 2015 2:11:50 PM $XIV $BIIB $FSLR $FB http://t.co/Fwi3qtbwpG
PolgarStocks
30 Jan 15 11:50:46
$AGG Opinions Updated Friday, January 30, 2015 2:07:42 PM $TBT $IWM $V $FSLR http://t.co/81I40QmgFG
Hieu Nguyen
30 Jan 15 11:36:48
$FSLR $LINE Oil suddently spike to $3.0. Can oil move to $5.0 today? Well, let keep an eye on it.
Langan Stocks
30 Jan 15 11:34:18
$SQQQ Financials Updated Friday, January 30, 2015 2:03:35 PM $TIP $FSLR $CXDC $MS http://t.co/RDGvebYrjY
Media Sentiment
30 Jan 15 11:00:30
$FSLR received a new alert. Find out why at http://t.co/5lwmDm2SCs #stocks #daytrading #trading #mkt #NYSE #NASDAQ #markets 389
Antonio Costa
30 Jan 15 10:58:54
$FSLR on the move
Antonio Costa
30 Jan 15 10:49:32
$TWTR took profits at 37.95 ... nice scalp... added now $FSLR
IH NASDAQ OMX
30 Jan 15 10:40:51
$CLIR Bid Size Click Here: http://t.co/eT3KY3YXsN Also See: $APF $FSLR $HRCR $BMY ~
Connie Lee
30 Jan 15 10:17:37
RT @WindStreamTech: $WSTI What an honor to have our technology selected by Inc. Magazine! http://t.co/G8o3uzjKA9 $SPWR $SCTY $FSLR $SOL $CS…
Antonio Costa
30 Jan 15 10:08:03
$FSLR Potential Inverted Head and Shoulder formation with a positive MACD divergence. http://t.co/yrFMzdgXu0
Market Int Center
30 Jan 15 10:04:29
Potential First Solar $FSLR Trade Has 12.04% Downside Protection ( http://t.co/OZo7G0CYRT )
				
				
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.