“You should come to China, Jeff. We will show you progress.”
This is how my conversation started out with a Chinese energy investor I met last week while on the road.
His name was Feng. He drank Budweiser, followed American baseball (while mocking my beloved Orioles), and has been a loyal Green Chip Stocks reader since 2006.
Feng is a smart guy. A chemist by trade, he loves to talk tech.
But he actually made his fortune in real estate and owns a number of rental properties in Arizona and California. He spends most of his time in Shenzhen, but also has a home in Arizona and a mistress in Thailand.
His English is nearly perfect and he definitely has the gift of gab. I should know... I spent three hours with the guy at an airport bar in Denver.
And after a steady flow of booze and overpriced bar food, he really started going off. Fortunately, with his permission, I was able to record a good portion of his tirade.
China is in control now. We buy you, your technology, your culture. We make it work. Your unions and your politicians attack China for not being fair. What's fair? You can't compete with our drive so you make excuses. We lead the clean energy race because we need power. Lots of it. More than you. So we support our solar companies, help them grow so they can service China and compete globally.
You? Your government raids some stupid little solar company that could never compete with China in the first place. Why? For politics? You waste time talking. We're doing. Your incompetent leadership has crippled your ability to be an economic leader. So China will take over now.
OK, so Feng is kind of a loudmouth.
And while I do agree with his take on our incompetent leadership, his assessment of the U.S. clean energy market isn't completely accurate...
America's Solar Swagger
I've been profiting from solar for close to a decade now.
I know the industry like the back of my hand. And from utility-scale developers to laboratory tech-geeks who make me sign NDAs and go through security checks before visiting their operations, it's not hard for me to get access to the latest developments in this sector.
After all, I was one of the few believers back when no one on Wall Street cared. And that has afforded me a sort of “all-access” pass in the solar space — one I am grateful for.
But I have to tell you that when it comes to solar manufacturing muscle, hardly anyone can touch the Chinese. It may be a bitter pill to swallow for a lot of folks, but it's a reality nonetheless.
That being said, the United States is not a laggard in the solar game.
Despite what Feng may want to believe, the American solar industry boasts a well-deserved swagger.
While it is true that most of the solar modules in this country are imported (about $1.2 billion worth in 2010), the U.S. actually generated $1.9 billion in solar exports last year. Most of this was from capital equipment and polysilicon.
Truth is, when it comes to solar, we're actually a net exporter.
Of course, when it comes to module manufacturing, the Chinese still run the show. And it's for this reason you'll find few analysts backing non-Chinese manufacturers. There's just no wiggle room on price, and aside from a couple of exceptions, no one can compete with China's low-cost production.
This is why Chinese solar companies like Trina Solar (NYSE: TSL), Suntech Power (NYSE: STP), and cell producer JA Solar (NASDAQ: JASO) remain the darlings among analysts.
However, a couple of weeks ago, one U.S. company did send a strong message after it announced a new efficiency for its thin-film solar cell that could allow it to outpace Chinese cost reductions...
And It Came from Arizona
Phoenix-based First Solar (NASDAQ: FSLR) isn't a new name in the world of solar.
In fact, after the company went public a few years back, the stock catapulted from about $30 to more than $300 in less than two years.
Of course, it's nowhere near that today. But it won't be long before this thing starts heading north again...
Because with First Solar's latest efficiency advancement, the company will actually be able to compete against fossil fuels — without government aid. And that's the key.
You see, First Solar recently developed a cell that is expected to yield a 15.3% conversion in mass production. That compares to about 11% today.
The efficiency yield on a typical, non thin-film cell from Chinese competition is about 15%. But those come in at a higher cost per watt.
Trina Solar — one of China's low-cost leaders — produced panels for $1.16 a watt in Q2. First Solar produces its thin-film panels for $0.73 per watt. And the higher efficiencies are expected to drive costs down even further.
These new cheaper, higher efficiency cells will be phased into production in Q4.
Looking for a Bargain?
Despite the bullish news on First Solar's ability to compete against both the Chinese and the heavily-subsidized fossil fuel industries, the stock has been hammered recently.
This is mostly due to the Solyndra mess and the fear that any solar company on the books to get a few bucks from Uncle Sam will have to wait out these dog and pony show investigations.
First Solar currently has a few billion in federal loan guarantees for new utility-scale developments.
Although last week, we did get word that the DoE informed First Solar that it didn't have enough time to process the company's loan guarantee application for its 550-megawatt Topaz solar farm...
But First Solar is actually already in advanced talks regarding the sale and financing of that project utilizing a different structure that is not dependent on a DoE loan guarantee.
Nonetheless, the stock hit new lows last week, offering bargain hunters an opportunity to pick up some cheap shares. This is basically a $125 stock trading at around $70.
Now, I know some folks are buying the lie that, based on the Solyndra debacle and not on the mountains of objective data, there's no future in solar.
But as one analyst pointed out last week, interpreting the end of the U.S. solar industry because of Solyndra is like saying there's no future for the Internet because Netscape went out of business.
Don't let the purveyors of lies and misinformation steer you in the wrong direction on this one...
The future of solar is bright, and the money we're going to continue to make in this sector is very, very real.
In fact, our latest solar play — a small tech firm that's developed a solar-powered window — is one of the few solar stocks that's actually been making us money while the rest of the market crashes and burns.
To a new way of life, and a new generation of wealth...
Editor, Energy and Capital
P.S. These solar companies like First Solar know that with the right help from government subsidies, solar will completely overtake fossil fuels. What proof do they have? These energy figures show just how vital solar is to the future of the U.S.
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