Welcome to the Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read Energy and Capital and sister publication articles.
It’s not all sunny for the solar sector…
Despite being on a torrid run of late and a generally bullish outlook, pockets of resistance are starting to form.
You can see the disparity in performance in this three-month chart:
I won’t beat the China drum any more (they’re clearly pulling away from the pack), but instead focus on the nuances of the sector expected to be important factors over the next year or so.
They’re all the biggest…
I don’t remember exactly who said it — it might have been a Citibank executive — but at a finance forum on Wall Street this summer, I heard every solar project approved in California this year would be sequentially larger.
This week, BrightSource Energy said it won final approval for a 370 MW solar thermal plant valued at $1.7 billion to be built in Southern California.
But this party’s just getting started…
Eight other plants between 500 and 900 MW are either being planned or under construction. A 980 MW plant is being built at Fort Irwin by Acciona; a 1,000 MW plant to be built by Solar Millennium was just approved for Blythe, California.
And that’s just solar thermal…
A 1,500 MW conventional photovoltaic plant is planned for the Panoche Valley.
And a plan has been floated to build a 5,000 MW plant on 30,000 acres of aging agricultural land in the San Joaquin Valley.
So everything’s good, right?
Sure, California has greenlighted thousands of megawatts worth of solar projects in the past month. But there’s a troubling reason why…
In order to qualify for federal stimulus funds, the projects must be approved before December 31 of this year.
That means the domestic solar market is on a precipice. With Congress adjourned and the hit Democrats are going to take in the coming election… chances of an energy bill this year are about as good as Lindsay Lohan staying sober.
So yes, a plethora of projects have been approved.
But that’s only because gridlock is on the way.
And the world’s largest solar market could be facing the same. A report out late this week claimed “rising costs for solar power in Germany could either trigger a further large cut in sector subsidies or a cap on new installations.”
That country’s feed-in tariff has been so successful that costs are climbing out of control. It’s a good problem to have — it means the industry is maturing — but it’s a problem nonetheless.
A similar cut caused Spain to fall from the largest solar market in 2008 to ninth place last year.
And, according to Robin Batchelor, who runs BlackRock’s $2.9 billion New Energy Fund: “Any softening in demand in this end-market (Germany) would likely return the market to over-supply and hurt pricing if not offset by growth in other large markets such as Italy, USA or China.”
How to play it
All these projects in California (and any rush to buy panels before another subsidy cut in Germany) will end up on balance sheets in the next few quarters.
I’d be using any buy-in opportunities that coming earnings present to establish a position.
That means buying on the dips for companies that fail to meet expectations this quarter… and then holding them for the payoff after projects currently being approved make their way to the balance sheet.
And it also means finding the best-in-breed companies for all current technologies. First Solar (NASDAQ: FSLR) in the thin film space; JA Solar (NASDAQ: JASO) for cells; Renesola (NYSE: SOL) for wafers.
So keep an eye on solar earnings in the coming month. And catch up on the rest of this week’s investment ideas below.
Call it like you see it,
Good News is OK, Bad News is Better: Investing in a Schizophrenic Market
Analyst Adam Sharp breaks down QE 2.0 and why it’s good for gold.
Free Options Webinar: Get in on this Free Potential 53% “Starter Play”
A short presentation by Ian Cooper explains options to even the most green investor out there.
The Nixon Shock: The Biggest Shock to Gold Since Nixon
Editor Christian DeHaemer tells you how to profit from the biggest commodity move since Nixon took the dollar off gold in 1971.
Lithium Demand Outlook: You Can’t Go Wrong with this Trade
Ian Cooper discusses global lithium demand and investment, and offers a few ways to profit.
Commodities are Poised to Head Higher: The Global Tide is Turning
Editor Steve Christ takes a look at emerging market demand and falling currencies as the recipe for the second leg of the commodities bull market.
Walmart Bets on Thin Film Solar: WMT Ushers in the Solar Future
Editor Nick Hodge discusses Walmart’s thin film ambitions while taking a broader look at the entire sector.
China’s Greek Bailout: 3 Stocks to Own on China’s Greek Bailout
Editor Jeff Siegel identifies three solar stocks that could benefit from China’s Greek bailout.
Secret Nuclear Meeting Heating Up the Sector: A Rendezvous 54 Billion Fed Dollars
An unauthorized photo… A story buried by the mainstream media… Hushed meetings behind closed doors between a tiny American nuclear outfit and the Korean government… They could all add up to one thing: a $36,950 return on your investment in this energy company by July 2011.
Iraqi Oil Wildcatters: Time to Loot the Oil Fields of Iraq
Christian DeHaemer tells you who is stealing Iraqi oil, where the plunder is going, and how you can grab your share.
The World’s Most Destructive Currency Terrorist: The Fallout of Alan Greenspan’s Toxic Legacy
Editor Greg McCoach examines the toxic legacy of Alan Greenspan’s irresponsible monetary policy, and how gold, silver, and other precious metals must inevitably rise as a result of the former Fed chairman’s dubious currency manipulation.
Biotech Bonanza: The Cure for Cancer is Just Around the Corner
One biotechnology company’s technology is working to make cancer, HIV, influenza, and malaria distant memories. Market guru Steve Christ has the inside scoop on the company with the revolutionary vaccine could bring you over 1000 times your money as it hits the market.
Is Mongolia the Next Dubai?: The Story of Stalin’s Lost Oil
Editor Christian DeHaemer shares his insider intel as to why Mongolia is about to ride the Chinese oil craze into a golden age.