The Hitchhikers Guide: The Re-Review of Solar Technology to the Universe
Comparing the start of the 21st century(and a new millenium) to that of the 20th century I must admit that I am a little disappointed. I remember watching the Jetsons and listening to Prince's "Party Like It's 1999." Today, I still wonder where my flying car is and sometimes I feel today is more like an episode of the Flintstones than that of the Jetsons. Despite my feelings the evidence remains that there has been no era of technological achievements greater than modern times. Personally, I feel advancements in solar technology(and thermal radiation) among many others are greatly needed for human advancement. I am ever optimistc about the future and our further advances and achievements(gloom and doomers).
Silicon Valley 2.0 - Another Tech Bubble?
Investment has always played the greatest role in innovation. Most innovations are created with few perceived applications that are economical, and very little demand and thus face many barriers. Solar technology has been no different. Sometimes, innovations are seen to be so marvelous that they create financial bubbles unforeseen. The beginning of the 20th century was still filled with the craze of the railroad boom and was eventually succeeded by the boom of the POV(Personal Owned Vechicle) and hundreds of auto-manufacturers. Other notable bubbles in the U.S. economy were steel, airlines, and of course the dot-com bubble. All of these bubbles while hazardous to short-term financial stability greatly advanced the standards of society. I'd imagine that I'd still be using AOL dial-up if there had not been the amount of investors willing to fund the network infrastrcuture of today's during 90's. In retrospect the consequences of many financial bubbles aren't so bad. However, the talk about a financial bubble in the solar industry is somewhat ridiculous. A real financial bubble(e.g. dot-com bubble) would be hazardous to the macreconomic environment and would total trillions of dollars. Honestly, I don't think there is enough investment in solar technology or perceive how less than 20 over-valued stocks can be considered a financial bubble.
If I could compare the progress and technology of solar cells to that of the prior boom in silicon products(computers) I'd say that a reasonable comparison would be that we're just entering the stage of digitally assisted type-writers. There's so much more room for technology to mature and many applications that aren't being used today. Also, like any industry there will be many companies around today that will not be in the future. The lack of consolidation in the industry thus far is proof that the industry of solar manufacturing is still in its infancy. However, there are plenty of reasons to still be optimistic today and why I'm not going to simply tell you "I'll get back to you in 10 years..." I imagine that investing in one of these companies today would be similar to investing in Hewlett-Packard or Intel in their earlier years. I haven't indentified who that will be, but there is still much to be learned and this article is mostly directed to the long-term outlook of photo-voltaic products.
How Does Solar Technology Work?
Simple Explanation: You combine certain kinds of semiconducting material(typically silicon) and construct it into a circuit(array) so once the electrons in the array are hit by sunlight it causes them to flow and creates an electromagnetic current.
There are many different materials used that create many different arrays of different efficiencies. Currently, the process of "First Generation" solar technology accounts for over 85% of global production of solar products. This process uses large quantities of silicon which limits cost reduction due to the vast amount of material required.
There is "Second Generation" technology which is being hyped and produced today. This is where thin-film technology enters. There are numerous thin-film processes that use different materials. The typical thin-film process uses anywhere between one half to one-one hundredth of the material needed by "First Generation" processes. First Solar and NanoSolar are probably your most talked about "Second Generation" companies.
There is "Third Generation" technology where there are currently no commercial applications. "Third Generation" technology expands upon the processes of "Second Generation" technology yet addresses higher levels of efficiency and conversion.
I imagine many speculators in the solar industry to be similar to the unknowing person shopping for their first computer. You may end up with a computer, but they're not all the same. There are many different component types and effiencies that go into the process and you probably won't understand what it is you're paying for. You could very well purchase something that is obsolete only weeks later. This very much applies to investors and actual customers. You can find a detailed explaination about Solar Cell Technology through Wikipedia. My intent is to focus on investing with only the most necessary information.
In this article I am only judging the prospects of the companiees and not their stocks. The intent of my ratings is from my analysis of whether these companies will even be around 15 years from now.
Ascent Solar Technologies 3/10
Canadian Solar 2/10
China Sunergy Co. 0/10
Emcore Corp. 5/10*
Energy Conversion Devices 6/10
Evergreen Solar 5/10
DayStar Technologies 3/10
First Solar Holding 7/10
JA Solar Holdings 2.5/10
LDK Solar 2/10
Solarfun Power Holding 2.5/10
SunPower Corp. 3/10
SunTech Power 4/10
Trina Solar 2.5/10
Yingili Green Energy 3/10
(ASTI) Ascent Solar Technologies: 3.5/10
"Second Generation" They are a spin-off from ITN Energy which has received DoD contracts in the past and produced other private spin-off companies. They have also been rumored for a take-over. This isn't a faker. Their second generation process uses materials(CIGS) that seems to have a very promising future, and the company founders combined control 11 patents. However, there isn't much to expect from their own business for years to come. They have a very vague web page and management discussion states they expect losses to continue throught at least 2009.
(CSIQ) Canadian Solar: 2.5/10
"First Generation" All of there business is done in China but they're Canadian Solar? They operate efficiently in the "First Generation" technology. They are heavily involved in the reclaiming/recycling of silicon which is currently very profitable. I don't foresee a strong future 10 years from now for CSIQ. As of today, Canadian Solar may be a decent way to play against rising silicon prices. They also make speciality solar products such as solar chargers for car batteries and GPS devices.
The political risks of China and lack of disclosure and SEC Filings are high negatives for all Chinese solar companies.
(CSUN) China Sunergy Co: 0/10
Dead "First Generation" technology. They're do not maintain any leadership in image or quality. They can't maintain profitability while everyone else in the industry is growing. Nothing further....
(EMKR) Emcore Corp: 5.5/10*
"Second Generation" Citron Report? Fake Customers? Fake Backlog? Accounting malpractice? Okay, before I face mass critism for this high rating I would like to add an asterisk while mentioning that Emcore will soon seperate their two core businesses into seperate companies. I don't know if they will IPO the stocks individually but there hasn't been much to say about Emcore until recently. This has been a dead-beat stock that has traded publicly for more than 10 years that experienced a huge run up during the dot-com bubble and has done quite well since the last bear market. Despite the questions surrounding their business their technology is real. Emcore is currently one of the leaders in solar efficiecy could easily gain substantial market share in the next decade. They have received defense contracts in the past and their solar technology has been implemented for use on satellites in the past. The problem has always been their ability to expand their sales. Here is the reason for the asterisk. If the United States begins to subsidize domestic solar production(which will eventually happen) I can easily see their technology being widely used for commericial solar power plants since I do not think the government is inclined to empower the people, literally. Now, I'm not convinced that Emcore will be able to manufacture their solar products on a large scale, but I do believe eventually someone will. Any comments are welcomed for Emcore. I will update my analysis of Emcore in the future.
(ENER) Energy Conversion Devices: 6/10
"Second Generation" - Sales have nearly tripled. Great technology. They manufacture a lightweight, flexible solar cell that can literally be rolled. This isn't your the solar cell on your calculator. Their production is relatively cost effective but they suffer from generally poor conversion rates compared to other technology available and their solar products are still not competitive with traditional hydrocarbons. However, they are working to reduce cost substantially and increase yield and efficiency. They have been pioneers in solar innovation. Their primary business is Uni-Solar (wholly owned subsidiary) which accounts for nearly 90% of their revenue.
(ESLR) Evergreen Solar: 5/10
"First Generation" String Ribbon Technology is the only way "First Generation" technology production can compete in the future, and Evergreen solar is the market leader. While energy conversion is lower the savings in production costs are substantial and more economical. Considering that nearly 90% of global production uses "First Generation" technology Evergreen could be the answer in converting the industry with their String Ribbon Technology. Other foreign manufacturers use Evergreen's String Ribbon Technology such as EverQ and Q-Cells. Evergreen isn't making any money today. They're dilluting their shares, and their quad-ribbon technology won't be fully implemented for years. Despite their large backlog they won't be making too much money tomorrow but the technology itself seems promising. There will be a lot of future share dillution and I believe investors are overly optimistic about their growth rate.
(DSTI) DayStar Technologies: 3/10
"Second Generation" - Similar pitch as Ascent Solar Technologies. They use a similar process using the same materials(CIGS). There has not been much financing activity to indicate growth. There probably isn't much to expect from the business for years.
(FSLR) First Solar Holding: 7/10
"Second Generation" - The comments about the toxicity of their manufacturing process are untrue. If First Solar had a 50 multiple as of today I would say that it's a reasonable buy and hold, but with a P/E above 120 for a $20 Billion company? They're selling solar cells - not the cure for cancer. Given today's valuations you'd think crude oil was trading at $1,000/barrel today. Although their semiconducting materials(CdTe) do not convert as effeciently as traditional "First Generation" silicon solar cells or as efficient as the CIGS thin film technology they are currently the most cost effective and it has been projected that their CdTe thin-film technology will economcially compete with traditional hydrocarbons within the next decade
JA Solar Holdings: 2.5/10
"First Generation" - I don't think there's too much excitement here. JA Solar is using past technology (traditional monocrystalline solar cells). JA Solar could eventually fall victim to consolidation in the future, but the valuations for many of these Chinese solar stocks are actually very reasonable for today despite their future extinction.
LDK Solar: 2/10
"First Generation" - I don't like the history of the company, but as a wafer/ingot producer they are also in the worst position for both today and tomorrow. Constraints in silicon supplies are expected to ease (LDK is opening the largest production in the world) which may limit their pricing power and if there are further supply constrains then that could cause a greater shift away from traditional silicon solar cells thin-film technology. Their history of financing and disclosure of contracts/customers have been poor.
"First Generation" - Manufacturer of solar wafers (not the actual solar cells). Similar pitch to LDK Solar.
Solarfun Power Holding: 3/10
"First Generation" - They use old technology. Another Chinese dinosaur. They were the subject of a lot of hype, but I wouldn't be surprised if there was lead in their solar modules.
SunPower Corp: 3/10
"First Generation" - They use old technology as well. They are vertically integrated which is very beneficial for "First Generation" producers long-term. However, they face tremendous competition. I wonder how long the tide can lift these solar companies until those who can't swim begin to drown.
SunTech Power: 4.5/10
"First Generation" - They are increasing production and the product line from their recent acquisition of MSK Solar. Building Integrated Photovoltaic (BIPV) modules are innovative PV modules that can replace traditional building materials such as shingles or siding. They are still one of the largest solar module manufacturers in the world and can easily compete with any of the larger traditional solar cell producers.
Trina Solar: 2.5/10
"First Generation" - You can play the valuations for these Chinese solars if you're inclined to.
Yingili Green Energy: 3.5/10
"First Generation" - They are vertically integrated which is beneficial for their corporate position.
The Difference and Future of Solar Technology
The economic feasibility is quickly becoming a reality for large-scale application. The cost per watt has dramatically declined from nearly $100 per watt in the 1970's to less than $4 per watt today for PV solar cells. It is widely accepted that the cost per watt for PV solar cells(second generation) will fall below $1 within the next decade making it highly competitive with other energy sources. The next generation of PV modules will need to improve upon efficiency.
Nanosolar is a highly anticipated and publicized company. Their technology incorporates print ink process of CIGS(copper indium gallium selenide) onto thin film foils. This application and use of CIGS materials for photo-voltaic applications is very promising to bring the cost per watt under $1, but the technology is probably a few years away before it gains enough commercial and investment for larger application. There are other private companies with similar prospects such as HelioVolt from Texas and GlobalSolar based in Arizona. The original concept for the ink print process and technology(CIGS) was developed by International Solar Electric Technology which is based in California.
The future of large scale solar thermal application is here. The processes of tomorrow(literally) are cost effective enough to compete with coal in areas with enough water resources. Any questions, comments, or corrections are more than welcomed. I'm no scholar. I just read a lot of junk from PhysOrg and other science journals... There are other processes being tested today that show even greater promise for the future of energy.
Pure - Notable Publicly Traded Companies(Non-U.S.)
PowerFilm Inc [U.K]
Q-Cells AG [France]
Renewable Energy Corp [Norway]
SolarWorld AG [France]
Related - Publicly Traded Companies
Mitsubishi Electric Corp