As usual when it comes to the stock market the answer is maybe yes, maybe no. Playing in the solar arena depends on how risk-friendly you are.
Yes solar stocks are hot at the moment but are they a good long-term play or a bubble ripe for bursting? J. Peter Lynch, a financial analyst and contributor to RenewableEnergyWorld.com, advises caution.
“If you are getting involved in solar stocks you have to be a little a careful right now. Don’t buy a solar stock and put it away,” he says. Instead be ready to trade and be alert to the fluctuations in the market and the players.
Solar stocks have been through a couple of surges since the late 1980s, “but we’re probably only in the second inning of a baseball game with solar stocks,” Lynch says. “At the beginning of a new market there’s more volatility, with very big moves up and down as Wall Street tries to figure out this new market. Eventually there will be a lot more companies and a lot more opportunities.”
Lynch notes that over a span of eight weeks earlier this year solar stocks grew 72 percent or essentially two years of growth in two months. “That’s unsustainable so I’d expect a correction any time now.”
That sounds very much like a solar bubble, or more aptly a financial sunspot.
Largely because of general economic conditions and the tight financing market, Lynch expects “a lot of compression” in the solar industry for the rest of this year and 2010 along with lower pricing, consolidation and even bankruptcies.
“There will be winners and losers and the winners that emerge will take off. There’s a huge opportunity for innovation now, especially in the realm of storage. Whoever figures solar storage out, well, that’s the Holy Grail.”
“Amidst the world economic recession and credit crisis, the solar industry is quickly amassing nearly as many predictions of gloom and doom as it attracted wildly optimistic forecasts a year ago,” says Daniel D. Martin, executive vice president for global expositions and standards with the SEMI PV Group.
Writing in Renewable Energy World Magazine, he notes, “Some analysts claim the worst is not yet over and that the shakeout will be brutal. They predict the higher cost of finance will continue to choke-off growth, sinking average selling prices, engendering demand destruction, and even leading to the loss of subsidies due to falling government tax receipts.”
Given that, “there’s no doubt the global recession will impact the photovoltaic industry,” Martin says. Some are forecasting that a massive restructuring is imminent.
“The recent solar bubble was driven by investor expectations – and government incentives that anticipated reaching grid parity in the next three to 10 years. Even without speculators and government incentives, solar power generation is in the early stage of a 30- 50 year run, serving an unquenchable demand for clean, renewable energy,” he says.
In addition the industry is in the early stages of the cost learning curve. “Few cell and module plants are fully automated and the supply chain is only beginning to develop optimal solutions for key production steps,” Martin says. “No one can predict who will ride this curve the fastest, but we can be confident the industry will cut costs and improve productivity every year for the foreseeable future.”
He doesn’t expect a big wave of consolidations, even though tight credit and the recession will “thin” the solar herd over the next year.
“We are in a global recession, marked by a severe credit crisis, but still in the very early stages of the industry lifecycle,” Martin concludes. “Geographical and political forces are still shaping the industry, and supply chain capabilities and strategies will remain a major competitive factor.
“Nonetheless, long-term fundamentals will make the PV market attractive to a wide variety of players for the next few years and a growing list of well-financed, global players will not retreat from a segment that may offer 30- 50 years of growth. New technologies – many of which will be disruptive – will continue to emerge, and the solar industry will likely evolve into several highly differentiated segments and niches.”
Ride the solar wave but mitigate the risk with lots of high-value SPF lotion.
Solar stocks, from SutainableBusiness.com’s Green Stock Watch:
3S Swiss Solar Systems (S3V.DE)
Akeena Solar (AKNS)
Aleo Solar (AS1.DE)
Ascent Solar (ASTI)
ATS Automation (ATA.TO)
Canadian Solar (CSIQ)
Carmanah Technologies Corp (CMH.TO)
China Sunenergy (CSUN)
Day4 Energy (DFE.TO)
DayStar Technologies (DSTI)
Deli Solar (CSOL.OB)
E-TON Solar (3452.TWO)
ENEL-SOCIETA PER (ESOCF.PK)
Energy Conversion Devices (ENER)
Entech Solar (ENSL.OB)
ErSol Solar Energy (ES6.DE)
Evergreen Solar (ESLR)
First Solar (FSLR)
GT Solar (SOLR)
ICP Solar (ICPR.OB)
JA Solar (JASO)
Jetion Holdings (JHL.L)
Kyocera Corp (KYO)
LDK Solar Company (LDK)
MEMC Electronic Materials (WFR)
Motech Industries (6244.TWO)
Open Energy (APSO.OB)
Phoenix Solar (PS4.DE)
PV Crystalox (PVCS.L)
Real Goods Solar (RSOL)
Renewable Energy Corp. (REC.OL)
Roth & Rau (R8R.DE)
S.A.G. Solarstrom (SAG.DE)
Solar Energy (SLRE.OB)
Solar EnerTech (SOEN.OB)
Solar Fabrik AG (SFX.DE)
Solar Integrated Technologies (SIT.L)
Solar Millenium (S2M.MU)
Solar Night Industries (SLND.PK)
Solaria Energia (SLR.MC)
Spire Corp. (SPIR)
Suntech Power Holdings (STP)
Sustainable Energy Technologies (STG.V)
Trina Solar (TSL)
Wacker Chemie (WCH.DE)
Webel Solar Energy (WEBEL.BO)
Xantrex Technology (XTX.TO)
Yingli Green Energy (YGE)