The Next Solar Bull Market

Jeff Siegel

Written By Jeff Siegel

Posted August 22, 2011

On a cool, rainy afternoon last Friday, a 6.8 magnitude earthquake jolted northeastern Japan.

A tsunami alert was issued right away for the Fukushima region, a place that needs no introduction these days.

But for the most part, folks paid little mind. After all, these types of things have become quite common.

Although there’s no denying that after the Fukushima nuclear disaster, the nation’s opinion of nuclear has changed quite dramatically…

Today, roughly 70 percent of Japan supports the complete abandonment of nuclear power generation.

The problem is before the Fukushima disaster, nuclear power accounted for about 31 percent of the country’s electricity needs. That’s a pretty big gap to fill for a nation with minimal natural gas reserves and a demand for coal that is primarily met by Australian exporters.

So it’s no surprise the Japanese government has been toying around with the idea of subsidizing solar and wind as a way to fill some of that gap.

And last Friday, the toying ended. Now it’s official…

Japan’s Going Solar!

Behind the backdrop of that 6.8 magnitude earthquake, Japan’s lower house of parliament gathered on August 19th to pass new legislation that will now heavily subsidize solar.

And when I say heavily, I mean heavily.

For solar, rates will likely command a 45 percent premium over current grid prices. And these rates are expected to last a full 15 years.

The question is, How can this information help you make money?

Sparking a Rush on Solar Stocks

In 2000, Germany restructured its own very generous feed-in tariff for solar.

The result?

From 2000 to 2010, Germany’s installed solar photovoltaic capacity experienced a staggering CAGR of 66 percent and basically took the solar industry from niche player to a billion-dollar behemoth that now boasts global revenues in excess of $100 billion.

Germany’s feed-in tariff was so significant that not only did it enable the country to get nearly 20 percent of its power from renewables (rising to 35% by 2020 and 80% by 2050), but it also sparked a rush on solar stocks.

From solar module producers to cell manufacturers, the solar industry continues to benefit from massive growth. And it all started with Germany’s feed-in tariff.

But here’s the thing: Germany was never in the same vulnerable position as Japan is today. Germany wasn’t crushed by a giant tsunami that ultimately led to the melting down of some of its nuclear power plants.

Japan’s energy crisis is unlike anything we’ve ever seen, and the Japanese government is faced with two very uncomfortable realities:

  1. The majority of Japanese voters will never support nuclear power generation again; and

  2. Without solar, Japan will become even further reliant upon foreign energy sources.

This is why Japan is about to pony up big-time to get as much solar integrated as fast as possible.

And this is why solar investors are now lining up at the door to get a piece of this action.

How to Play Japan’s Solar Transition

The immediate beneficiaries of Japan’s new solar subsidies will be Mitsubishi Heavy Industries (PINKSHEETS: MHVYF), Panasonic Corporation (NYSE: PC) and Sharp Corporation (PINK SHEETS: SHCAY).

Chinese solar players like JA Solar (NASDAQ: JASO) and Suntech Power (NYSE: STP) will also get some of this action.

But for the big money, we’re not necessarily interested in just the “immediate” beneficiaries. No, we’re looking at the disruptive players, too. We’re interested in the companies that are going to swoop in with new pricing structures and new technologies that will enable Japan to get this done — but at a much cheaper cost than what Germany had to pony up twenty years ago.

From low-cost cell manufacturing out of China to technological breakthroughs like solar plastics and solar windows, Japan is going to embrace any solid technology that will enable large-scale integration without taking on any more large-scale debt.

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Jeff Siegel
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