Weekend: MIT's Energy Revolution

Written By Nick Hodge

Posted October 23, 2010

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.

Despite getting caught up in this week’s turbulence, solar stocks have been on a tear lately:

Solar Stock Chart

Several stars are aligning for the industry, and I’d like to highlight those before moving on to the relevant news.

For starters, the solar market has now recovered from the oversupply that was 2008. The solar ramp-up commenced just as the recession began, causing inventory to pile up… but that has now been worked through and the supply/demand balance, restored.

Prices have also been falling, thanks to stiff competition from the Chinese. According to Sharp Solar VP Ron Kenedi, the cost of a solar system has dropped 35%-40% in the past 14 months.

The market has also taken root — as most do — because of incentives. Widespread feed-in tariffs in Europe and a 30% Treasury Grant Program in the U.S. have done well to foster solar demand.

It’s all led to robust growth for the sector, driven by the solar thirst of homeowners, businesses and utilities. There were 33,000 residential solar installations in 2009 — a 40% increase over the previous year — And utility-scale projects grew 267% in the same time.

Falling prices and incentives have sparked global demand for solar… and are leading to record profits for solar companies and their investors.

Solar ThermalCritical mass

Solar projects are reaching a point where a chain reaction is inevitable.

Hardly a day goes by that a utility — even conservative, coal-centric utilities — doesn’t announce a new solar project.

From the just-announced 20 MW traditional PV plant in Pilesgrove, NJ…

To the 370 MW solar thermal plant being built by BrightSource in the Mojave Desert (pictured)…

A conga line of solar projects are being planned and constructed — each one bigger and more advanced than the last.

It’s why the solar market is expected to grow tenfold by 2014.

Selected solar news

Earnings season is here and most solar companies are anticipating good reports.

A number of banks and analysts have upgraded solar stocks in the past few days, and it’s probably worth picking up some shares before the companies report in early November.

Some companies, like LDK Solar (NYSE: LDK), are saying outright just how good the market is right now. It’s already raised its outlook for third quarter revenue and wafer shipments, and said this week it expects a strong order book for 2011.

According to chairman, CEO, and one of the world’s youngest billionaires Peng Xiaofeng, “In 2011 the market is very bullish and we have received a lot of orders especially in the first half of the year. Demand is very strong across the world.”

Remember, this is still an infant market… The electricity market is still dominated by coal and natural gas, which means there is plenty of market share to steal — and plenty of profits to be made.

And that’ll be much easier as the technology improves. We’re already seeing it evolve at breakneck pace.

Traditional panels are constantly increasing in efficiency; thin film is allowing us to build solar right into building materials or roll it out on flat roofs; and solar thermal and concentrating photovoltaic (CPV) are allowing utilities to generate more and more electricity in less and less space.

The next-generation will be even better…Paper-thin Solar

MIT just unveiled paper-thin solar cells — literally.

The MIT lab, run by Karen Gleason, deposits five layers of nanomaterials on paper to make a solar cell that generates power. Gleason anticipates solar lampshades, window blinds and drapes, and flexible solar strips for DIY home projects.

When asked when the technology will be commercial, she said, “I think five years is not unreasonable.”

But you can invest in the technology now. Through a partnership with MIT, it’s owned by Italian utility Eni (NYSE: E).

You can catch up on the rest of this week’s investment ideas below.

Call it like you see it,

Nick Hodge


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