Solar Installations Continue to Grow

Key to Profitability is Cutting Costs

By
Wednesday, November 21st, 2012

We've seen what happens when crony capitalism enters the energy industry.

Today if you type in the ticker symbol of multiple clean energy companies that received government funds, you'll get the same error message: TICKER NO LONGER VALID.

That's because scores of them have been delisted. Bankrupt, in bankruptcy, or on the verge of it.

Evergreen Solar (ESLR)... Satcon Technology (SATC)... A123 Systems (AONE)... Ener1 (HEV)... They're all gone, completely erased from stock market history or trading for pennies on Pink Sheets as former hulls of themselves.

Much of this is because the government bet on friends and supporters instead of technology that can compete in the real world.

The key to successful clean energy is to lower the cost, not to reinvent the wheel. But that's precisely what failed solar companies like Solyndra were trying to do...

Solyndra was trying to perfect expensive copper indium gallium selenide (CIGS) solar cells. These types of cells are still just a tiny sliver of a market still dominated by silicon.

Silicon solar still accounts for over 80% of the market.

It will be improvements and cost reduction in this area that will lead to widespread adoption and profits.

Record Growth Continues

As we approach 2013, we're starting to get an idea of what the year looked like for solar installations.

I've told you already this year that 2011 was actually a great year for solar investments, with $91.6 billion changing hands for a 20% improvement over 2010's $71.2 billion.

But this year looks like it's going to be even better...

According to GTM Research, installations in the first quarter this year were 83% higher than 2011. Installations in the second quarter were over 115% higher!

The trajectory is only moving higher:

U.S. Solar Installations 2012

So solar investment is up. Solar installations are up. And that's all great.

So, then why does a chart of solar stocks look like this?

Solar Stocks Fall

If so many solar panels are being sold, why is every stock in the industry from First Solar to Sunpower to Suntech down over 80% since 2008?

The answer is simple yet misunderstood.

It's because prices have been falling so fast and solar panels have turned into a commodity.

Think about it. If a company produces oil for $100 per barrel, it can't make a profit when oil is below $100 per barrel. Same thing in solar — but instead of a “per barrel” price, solar has “Average Selling Prices.”

And they've been falling extremely fast. In the first quarter of 2011 solar panels were selling for $1.56 per watt. Today they're selling for less than $0.90 per watt.

And if a company can't cut its own costs fast enough... it won't make a profit, and it will be forced to close like our friend Solyndra.

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This is counterintuitive because all you hear is that solar is too expensive.

As the selling price falls, demand is surging. Installations are growing faster than ever while solar companies continue to struggle.

This industry isn't dead by any means.

As soon as production costs fall enough to increase margins and grow profits, solar companies will be in for a major turnaround. And the solar industry is still so small it will produce huge percentage growth for years to come...

The time to buy is now, while the blood is in the street.

Solar investments will expand to $130.5 billion by 2021.

The key to profits for you will be investing in the companies that do the most for reducing the cost of solar.

It's not going to be the popular solar names you've probably already heard of. Those guys will be fighting for pennies per panel.

Instead, I've found one company that has a special coating process that all other solar companies can use. It's a simple process that can double the output of current panels while cutting the cost in half.

And this company will license to any solar production company.

The stock is still below a dollar, but customers are lined up from North America, Europe, and Asia.

It's happening very quickly. This market will take a lot of investors by storm and it will leave naysayers in the dust. Don't be one of the latter.

Now is the time to invest in the solar game-changer that doesn't need government handouts.

Make sure you see it here first.

Call it like you see it,

Nick Hodge Signature

Nick Hodge

follow basic@nickchodge on Twitter

Nick is the Founder and President of the Outsider Club, and the Investment Director of the thousands-strong stock advisory, Early Advantage. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.

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