Solar Energy Investing - Energy and Capital

Bill Gross Bets on Solar Thermal with eSolar

Investors take notice when Bill Gross places a market bet.

If you haven't heard of the man, you've certainly heard of the billion-dollar companies he's incubated and brought to market or the business models he's created.

By my count, he's made lucrative exits from 59 companies either through acquisition or initial public offering (IPO) — a venture capitalist empire by any measure. NetZero, answers.com, tickets.com, and PetSmart are included in that count.

Gross is also an expert at pioneering new ways to make money. His search engine GoTo.com was the first to introduce the concept of paid search to the Internet. The company was bought by Yahoo! for $1.6 billion and was the precursor to Google's highly profitable pay-per-click advertising model.

The man is an entrepreneurial genius. And now he's lending his expertise to the energy world...

The Smart Grid: A Smart Investment

It's being called “the biggest investment of the next 50 years” by the CEO of GE.

The likes of Cisco and Bank of America are also on the edge of their seats, anticipating the boom of smart grid technology.

In fact a Bank of America (NYSE: BAC) analyst recently said they expect 80-140 million meters to be installed in the next 10 years — and a total smart grid investment of $215 billion in the next four to five years.

This is going to be huge.

The time to invest in smart grid technology is now — and we have all the details of how you can get in on pure plays in this report.

The Problem With Solar, and the Bill Gross 'Fix'

Detractors are quick to point out solar's current flaws:

It's still too expensive;
It doesn't scale;
It doesn't produce power at night.

And while the rooftop solar market is a great distributed energy solution, it falls short of being able to provide baseload power at competitive rates, which is essential in today's electricity business.

Gross's new venture is aiming to change all that.

The company, eSolar, is making utility-scale solar energy solutions capable of generating up to 500 megawatts per plant — enough to power nearly half a million homes.

Its unique system uses hundreds of specially-designed mirrors — called heliostats — that reflect solar heat onto a central receiver. The receiver holds water that boils when heated by the intense sunlight; the steam is used to create electricity.

Each unit produces 46 MW. And the system is completely scalable, so a utility can install one unit or ten. The latter would generate 500 MW and look something like this:

The company is already garnering lots of attention and dollars — including more than $130 million from Google, NRG Energy, idealab, and the Quercus Trust — as they address solar pitfalls one by one.

It's Not Too Expensive

Rooftop requires using panels made out of large amounts of highly refined (and very expensive) silicon. According to Gross, that cost can be measured in dollars per square inch.

By using mirrors instead of silicon, eSolar can bring the price way down; their cost can be measured in cents per square inch, not dollars.

In a recent interview, Gross said the company's goal is to "make a utility-scale power plant actually compete with fossil fuels with no subsidies." He added, "And we're getting very close."

In fact, the company claims it already competes head-to-head with natural gas in California.

That's why NRG Energy (NYSE: NRG) — which boasts one of the largest electricity generation portfolios in the country — is using eSolar's technology to build 11 solar power plants. The plants will be built in the Southwest and have an eventual capacity of 500 MW.

As a Fortune 500 company with numerous coal plants under operation, you can bet NRG isn't all that interested in clean power or reduced emissions. They're after cheap baseload power... And eSolar can deliver it.

It is Scalable

They're also addressing the issue of scalability.

Because rooftop solar installations are typically only a few kilowatts, it's harder to reach scale. That is, fewer projects are completed in varying locations, making it harder to drive down costs. Each system is also unique, which means each one needs to be designed and installed separately.

And while rooftop solar companies are making great progress in making their business more formulaic, eSolar is already there.

Their systems are prefabricated and can be installed with low-level labor. A 46 MW unit comes ready to install — with the mirrors, central tower, condenser, and other parts.

To scale up, one needs to simply order another unit.

This is what's so attractive to utilities: clean, cheap, baseload power that's easily replicated. The model fits nicely into their long buy cycles and, because each system is identical, helps them more easily meet regulations.

It Does Work at Night

The last reason utilities haven't widely adopted solar is a simple one: The sun doesn't shine at night.

Utilities need generation sources that work at all hours like coal, natural gas, and nuclear. In their mind, it's pointless to build a solar plant if it needs to be backed up by natural gas.

eSolar is changing that, too.

Remember, they use steam, not photovoltaics. In other words, they use the sun's heat to make electricity, not its light.

By storing that heat, eSolar can produce electricity at any time — even at night — making it truly a source of baseload power, with no fuel requirements after initial installation.

Breaking all these barriers could make solar thermal the go-to choice (over even coal and natural gas) when utilities need new generation in sunny locations.

Think about it...

NRG could've built a new coal- or gas-fired plant. But they chose solar thermal.

China could've chosen another fuel source for an upcoming 2,000 MW project. But they, too, chose eSolar earlier this year in one of the largest solar deals to date.

The same scenario played out in India, where eSolar has been selected to build 1,000 MW worth of projects.

These are multi-million dollar energy deals, looking to award contracts to the cheapest bidder. And everyday, solar is edging out its fossil counterparts.

You can bet eSolar will be the 60^th company from which Bill Gross makes a lucrative exit. It might even be an IPO that you can get in on.

Call it like you see it,

Nick

P.S. While you can't invest in eSolar yet, there are plenty of other solar companies turning hefty profits for investors. And because of clandestine gov't deals, a few are pushing higher than all the rest. In fact, I've found an annual closed-door summit that has sent select energy companies soaring every time it convenes. This year, a solar company is in for a large windfall. Our new report outlines this series of conferences and the companies that will get a share of the government "kickbacks" this year.

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Solar Stocks for 2010

With third quarter numbers starting to surface this week, it's not too early to start thinking about next year. . .

And there's plenty to think about.

Stocks in general are sitting on 52-week highs, leaving even the most ardent bulls with a finger on the sell button, ready to take profits at the first sign of trouble.

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The quarterly reports coming out over the next few weeks could be that sign, since this earnings season will still see a lot of purging — even with the recession waning.

If you know what's in store for the long term, any earnings-induced sell-off could present a monumental buying opportunity. Over the next few weeks, I'll examine a variety of energy sectors and give you my take on the 2010 picture.

Solar Stocks: A Recap

Upon review, the second quarter wasn't at all bad for solar stocks.

Most household names reported earnings higher than Street estimates, including First Solar (NASDAQ: FSLR), Suntech (NYSE: STP), and SunPower (NASDAQ: SPWRA) — all of which turned a profit.

Several companies also reiterated or raised forward-looking guidance.

But I'd be remiss if I didn't say there was a feeling of anxiety brewing. Some second-tier companies lowered gross margin outlook as a result of falling average selling prices (ASPs). Module prices fell ~9% in the quarter, ranging anywhere from $2.50-$3.00/W, and were expected to decline further in the second half of the year.

Further up the supply chain, prices were also falling for polysilicon, the industry's raw material. Prices have been reduced by more than half and are now hovering in the $50-$60 per kilogram range. Producers like MEMC (NYSE: WFR) need prices above ~$28 to turn any kind of profit.

So the pressure was mounting. And the strategy, by most accounts, was to increase volume to offset falling prices. Global stimulus packages were created to help do just that.

Upcoming earnings numbers will show whether or not that strategy worked.

Solar Stocks for 2010

There is certainly much to consider when looking at stocks with a 12-month lens. For some time now, I've been using a proprietary system to weigh some of those factors for me.

It's called the "R-Track," and it takes into consideration — among other things — the projected future earnings of related groups of stocks.

From what I can tell so far, there's a dark horse that could be best performer in 2010.

The company is Trina Solar (NYSE: TSL), and it's already shaken off the recession like nobody's business:

Upon beating earnings estimates in the second quarter, they confirmed third quarter guidance of 90-110 MW shipped, with a decline in ASP of 10-15% from $2.32/W in Q2.

What's more, the company reiterated full 2009 shipments of 350-400 MW, which would require significant growth in the fourth quarter. A 200-MW backlog should help out.

Trina is also lowering in-house costs, guiding to $0.80/W from $0.86/W at the same time polysilicon prices are falling. This will help keep the gross margin stable.

And surprising — even to me — is the fact that Trina has one of the best long-term revenue and earnings growth rates. In the second quarter, they earned twice as much as SunPower and 17 times more than Suntech.

Look for them to remain quietly dominant over the next year.

Another company I expect to do well is Canadian Solar (NASDAQ: CSIQ). They, too, have shown strength of late, outperforming more well-known domestic names.

Chinese solar suppliers in general have been steeling market share from European and American competitors.

The company reported higher-than-expected sales and margin after the second quarter, and actually increased its 2009 shipment guidance by more than a quarter. The company picked up 15 new customers earlier this year, and is increasing sales across Europe, Asia, and the U.S.

And like Trina, Canadian is rapidly reducing costs. In fact, they're already beating Trina with a $0.60/W processing cost, brought on by its ramp of internal wafer capacity.

If the past six months are any indication, Trina and Canadian could outperform their peers over the next year:

A Final Word

While Trina and Canadian Solar have the potential to outperform next year, there are plenty of other solar stocks from which to profit.

The two I chose to highlight have great fundamental pictures. But getting cozy with the entire sector is a sure path to frequent profits.

For example, I've used my "R-Track" system to close 17 winning solar stocks so far in 2009. I closed Canadian Solar for 20% and I'm up about the same in Trina.

But I've also played several other solar stocks for profit — from both China and the U.S. — by using data compiled from my "R-Track."

I want you to invest in cleantech stocks with the same frequency and precision.

To that end, I've prepared a full report that describes the system I've designed, and how you can use it close winner after winner in the clean energy sector.

Taking advantage of the "R-Track" system today is the only way to get constant profits from the renewable energy boom that is fully underway.

Call it like you see it,

Nick

P.S. I know the information needed to consistently trade winning energy stocks can be confusing. EPS, ASPs, gross margins, megawatts shipped, peer pricing. . . it can all be a bit overwhelming. The "R-Track" system I've devised takes all the guesswork and uncertainty out of energy investing, giving you the power to buy and sell winning stocks at will. Make sure you read about this new way of investing before you buy another energy stock

Investing in Chinese Solar Stocks

China is giving money away.

And getting your share has never been easier.

Like the U.S., China recently announced a stimulus with incredible benefits to the alternative energy industry.

Investors in the know have already taken two rounds of easy profits — one on the U.S. package and, just recently, one on the Chinese announcement.

But there's much more to come, and I'll get to that in a minute.

For now, take a look at what you missed if you didn't heed my advice in last week's issue about Chinese solar stocks:

Here's what I had to say about that group of stocks last week:

World governments -as we've just seen- are busy coiling the spring for solar's success, and investors are clearly taking notice. You need to stake your position now, and at the right price, to be ready when it pays off.

If you heeded my advice you might've doubled your money in the past week.

Those willing to move their money from the sidelines back into the action have already recouped some of the severe losses of the past few months. In fact, this March offered the best stock market performance of any month in the last six years.

Such is the nature of the current beast.

It's emotional and irrational. . . far different from markets in the past. But it's times like this in which big profits are made.

To clarify, traditional market indicators are out the window here, and have been for awhile. Investors have been trading on hopes, fears, intuition, and anger. Bull or bear, your sense of the market isn't grounded like it used to be.

That's why announcements like the U.S. and Chinese stimuli create such large runs, even before investors know exactly where the money is going.

And that's where expertise comes in.

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Emotions, Expertise, and Actions

The current market is one of actions.

Governments and regulators are taking actions everyday. TARP was an action. The stimulus was an action. Reducing lending rates is an action. Loosening accounting rules is an action.

And the market reacts to each one differently, for better or worse.

Yesterday, for example, the financial sector rallied thanks to now-famous accounting changes made by the Financial Accounting Standards Board. Trading for 10% or better yesterday should've been easy, provided you're intimate with the financial sector and their price ranges of late.

Of course, I use that only as an example. But the same applies when dealing with energy.

Just as savvy energy investors profited from the $104 billion "green" section of the U.S. stimulus, which was riddled with support and incentives for wind and solar, so to is the Chinese version creating fortunes.

And that's because, as I said earlier, China is giving money away.

The solar subsidy in their stimulus offers a 20rmb per watt discount on the cost of solar panels for new installations.

You may not know how serious the implications of that are. . . but you soon will.

A 20rmb per watt discount translates to $2.92 per watt. Thing is, solar panels are only selling for about $2.70 per watt right now.

So the Chinese government is about to pay 100% of the panel costs for installation. They are giving away money and guaranteeing solar profits for you.

This is where the expertise comes in. You have to be familiar enough with the Chinese subset of solar stocks to profit. And that's not something I can teach you in one article.

The emotional aspect comes in because you have to anticipate how traders are going to react. This is also a topic I touched on last week:

You see, a 40-60% jump across an entire sector in just a few days equates to nothing more than a closet love affair. It means The Street is brimming with anticipation for a cleantech resurrection, exploiting and overbuying any positive piece of news.

Lesson: solar stocks are itching to rise, and investors and governments alike are itching to make it happen.

I'd say those statements have been verified — as you saw in the 1-month chart above.

But here's the chart that should get you really excited:

It's the same five Chinese solar stocks, only pulled out to 1 year. Even with recent 60% runs or better, these stocks are still down as much as 70% over the past year.

They'll double. . . and even triple as they rebound — and as China picks up 100% of new panels costs.

Are you ready to take action?

Call it like you see it,

Nick

P.S. Readers of Alternative Energy Speculator are already taking action. We capitalized on March market madness with nine winning plays. . . and six of them came from Chinese solar stocks. We're loaded up for the next run, sitting on seven other winners just waiting to be cashed out. But you have to play to profit. Click here to start today.

P.S.S. I'll be at the Renewable Energy Finance Forum - Wall Street getting the inside scoop about global cleantech stimuli and related financing. This is the premier event if you're interesting in ivesting in cleantech. Click here to learn more of folllow the banner below.

Chinese Solar Stocks

Look what happened yesterday:

Wall Street got that warm fuzzy feeling from solar stocks once again, some surging 60% or more in a few days time.

But it's not the gains I'm interested in — reality will return soon enough — it's the eagerness with which the smart money flocks to cleantech that's important here.

It's much different from the atmosphere just a few weeks ago, when one piece of bad news could squash any number of positive reports.

In this case, all the fuss was about Chinese solar stocks on news of a Chinese stimulus with strong solar provisions.

The bounce was overdone by all measures, and the stocks are already starting to correct themselves.

But a 60% run won't be erased overnight. And while they might drop a bit, this could be the very bottom of the other side of the trough.

I'll take two steps forward and one step back over what we have been dealing with.

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What Happened, What to Expect

Basically, the Chinese Ministry of Finance announced a stimulus that would have some sort of solar subsidy.

I can tell you that the solar portion of the recent U.S. stimulus will dwarf any measures taken by the Chinese. Yet the reaction of Chinese solar stocks to their stimulus dwarfed the response American solar stocks to our stimulus.

It's all about timing. The market was ready to run when the Chinese news came out. We were still in the recession death grip when the U.S. stimulus was passed.

The Chinese are offering a subsidy of about $3 per watt for solar installations over 50 kw. That would cover about 60% of the cost of an installation.

But the visibility is poor. . . there has been no indication of how much money will be available or to how many megawatts the program would apply.

There's also a time factor. The provisions being offered by the Chinese government to aid the solar industry would likely not have significant impact until 2010, based on ongoing economic conditions, contract negotiations, and the nascent state of the rooftop solar industry in China.

But the proposal is still a market driver in the long-term, especially since this is widely considered only China's first step to boost the use of solar. You've already seen how the stocks reacted.

I'll let Piper Jaffray's Jesse Pichel sum up the implications:

Although profit taking will likely follow, we believe Thursday's reaction showed:

1) It doesn't take much incremental demand to move the solar market, with 250 MW moving worldwide solar market by 5% in 2009. 2) Investors are optimistic w/ the long term outlook of solar and will cover short positions w/ the first onset of market strength.

Lesson: solar stocks are itching to rise, and investors and governments alike are itching to make it happen.

Solar Stocks: How Long Will it Take?

Well, it depends on what you're waiting for.

Sustainable profit trends in the solar sector aren't likely to emerge for the next few quarters. When they do. . . it's off to the races.

In the meantime though, you can still make money on solar stocks, it just takes a bit more work and patience.

More work because you need to be familiar with all the major stocks in the sector, know what their fair value is, and be able to track their trading patterns in this still-hostile environment, pouncing when you know they're too low.

More patience because you have rallies like yesterday that send the stocks too high too fast, and you must wait to they sell off to avoid chasing them and having the rug pulled out.

Consider the example of JA Solar (NASDAQ: JASO):

I know that fair value for that stock is about $4.00 based on current and future earnings.

But for the past few weeks the stock has traded well below $3.00 and has dipped below $2.00 at times. . . offering several obvious bargain hunting opportunities.

Smart investors like readers of the Alternative Energy Speculator capitalized. We played the stock twice for profit late last year and twice more this month for average gains over 24%.

And we're holding out for even higher gains with a long-term position.

So the answer to how long it will take to make money on solar stocks can only be answered in relation to how much money you want to make.

Get familiar with solar stocks.

World governments —as we've just seen— are busy coiling the spring for solar's success, and investors are clearly taking notice. You need to stake your position now, and at the right price, to be ready when it pays off.

Call it like you see it,

Nick

PS. Alternative Energy Speculator members have been turning intricate knowledge of the cleantech space into profits all year. . . as most other markets continued to tank. We've closed 13 winning positions this year and 9 in March alone. And we continue to hold several other stocks for even higher long-term gains. Click here to get in on this cleantech profit action today.

Solar Market Trends

Over the past few days you've heard about several different visions and ideas of how the future of energy should look, and how different policies are being constructed to get it there.

Most of the topics discussed were major efforts to reduce (or eliminate) the use of foreign oil by drastically expanding the use of electric and natural gas vehicles, using coal more wisely, and improving efficiency.

I'm a fan of an all-of-the-above approach, both for energy and investment solutions.

So, since the previous visions this week focused mainly on liquid fuels, I wanted to spend today on the electricity side of things, with particular attention to solar.

Solar Growth Trends

Here's a chart I've used before*:

That's a visual representation of installed solar capacity since the turn of the century. If the chart looks impressive, it's because the solar market grew over 1,500% in the past eight years, from less than a gigawatt to well over 15 gigawatts.

For nearly a decade, the industry surged ahead with a compounded annual growth rate over 40%, and Green Chip investors made a lot of money on the companies making it happen.

And the solar market is set to triple in size in the next seven years!

By 2015, installed solar capacity will grow another 347% to over 72 gigawatts as utilities worldwide are incentivized and forced to adopt sustainable production assets, and as solar energy reaches price parity in a growing number of markets.

In order for those forecasts to hold true, improved policy is going to have to do battle with current economic conditions.

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The Current State of the Solar Market

The solar market is currently facing rapidly falling prices, both for its raw material and its finished product. I spent some time on the subject in a recent Green Chip Review article.

A seasonal dip in demand and the related oversupply of panels coupled with the general economic slowdown and restricted lending has led to a recent ~30% decrease in selling prices for solar modules.

Of course, the operating costs of solar companies haven't fallen as quickly, forcing companies to reduce profit margins as they sell discounted panels. In fact, in the recent price scramble, Chinese manufacturers have opened an advantage over historically dominant European companies.

Established Chinese producers are currently offering contracted prices of about €2.00 per watt, while European suppliers are struggling to break below €2.50 per watt.

As such, Chinese solar companies are poised to gain some European market share. You should see that reflected in their share prices over the next few quarters.

First Solar (NASDAQ: FSLR), of course, with their cadmium telluride thin film technology, is still the industry cost leader, able to produce panels at less than $1.00 per watt. As the industry's continuously preferred supplier, FSLR should also be your preferred solar investment.

But even at $1.00 per watt, First Solar's stock has taken a ~50% hit over the past six months as investors feared a continued recession and tight credit would further dampen new project starts.

Less dominant solar stocks have fared even worse, down 60% or more in the same time.

But new indicators are pointing to loosening credit for solar projects, and global government efforts to stimulate the industry are about to pay off for the solar industry and those who invest in it.

Regreasing the Solar Wheels

Even with the economy in the pits, the German solar market—the largest in the world—is still slated to grow ~30% this year, thanks to renewed lending by German state bank KfW. Funding for rooftop and small ground installations is also flowing again from large European investment banks and local savings banks.

Companies familiar with the market have indicated it will be a few more months before solar funding eases in the rest of the EU.

Point is, if you invest in solar this year, make sure the company has exposure to the German market, which will be one of the earliest to recover.

I think we'll also begin to see some space emerge between solar companies that once moved in stride. An oversupply of panels means distributors and integrators can be highly discriminate when it comes to choosing which company they patronize.

Only the most highly-efficient panels with the best prices and best warranties will be purchased. Smaller Chinese companies are probably the most at risk.

Balance sheets for all solar companies will be off for the next few quarters as reduced demand from the recession and cyclical seasonal patterns works its way off balance sheets.

In addition to Germany, the U.S.—considered the sleeping giant of the solar industry—is also doing much to ensure a robust solar rebound.

Here's just a bit of what our recent stimulus did for the solar industry, as I told it to Green Chip readers a few weeks ago:

Investors are now able to take a 30% federal refund on the value of a new installation before deducting any state incentives. So a theoretical $100.00 dollar solar system in North Carolina (35% state credit) now only costs the investor $35.00-because both federal and state incentives are now calculated from the full price. Best part is, those federal incentives have no cap and the project need only be finished by 2017 to qualify.

This incentive alone will rapidly increase solar demand as homeowners and investors alike rush to get discounts on solar installations on the taxpayers' dime. But there are many more solar provisions in the stimulus that will only magnify the gains that can be taken on the right solar stocks.

There's also $6 billion dedicated to paying the fees on guaranteed loans. This clause is aimed at encouraging banks to make loans for renewable projects. Most estimates say that $6 billion in guarantees will translate into $60 in new loans.

And Congress didn't stop there.

They also guaranteed profits for you by setting aside $5.5 billion so federal buildings (including schools) can increase energy efficiency and their use of renewable energy. The U.S. General Services Administration (GSA) estimates that 75% of the projects that receive this funding will use solar technology.

For a full list of solar benefits included in the stimulus, click here.

Those provisions have led most analysts to forecast year-over-year solar installations to double in the U.S., from ~300 MW last year to between 600 and 700 MW this year. Another doubling by 2010 is in the cards, and by 2016 solar capacity in the U.S. could rival current worldwide capacity. . . hence the sleeping giant.

Globally, forecasts are more mixed but still positive. Q-cells (XETRA: QCE) sees 40% growth in solar installations this year to about 7 GW. First Solar's view is more conservative, citing maximum global installations of 5.5 GW—about the same level installed in 2008.

Bottom line: the solar industry is still facing turmoil. Credit is still hard to come by, but there are opportunities for low-cost, high-quality providers. The second quarter will probably be the low point for installations, as weather in major markets begins to ease. First Solar currently has the best cost, and major Chinese producers are next in line. Changing global policy should incite a strong rebound, with the raw material side of the business remaining subdued a bit longer.

Call it like you see it,

Nick

P.S. Even with ongoing solar volatility, readers of Alternative Energy Speculator continue to profit. In March alone we've closed five winning positions on solar plays. And we're going to profit from the broad solar rebound that will occur later this year as well. My new report, "Buy American: Three Solar Stocks for Profit," has helped thousands of investors prepare their portfolio. Get your copy by becoming a member of the Alternative Energy Speculator today!

*Charts provided by GlobalData

2009 Solar Energy Overview

As investors, you're obviously at least aware of the now ubiquitous solar market.

But simply being aware of it is no longer enough. To really make money in this industry—predicted to grow as much as 35% annually for the next few years—you must first fully understand how a solar panel comes to be and which companies specialize in each step of the process.

The Solar Panel Process

Long before a solar panel (called a module in the industry) can be installed on a roof there are many steps that take place.

It all starts with plain ol' sand, from which silicon is extracted via various processes.

The refined and nearly pure silicon, called polysilicon or poly, is then heated and cast into cubes, called ingots.

Cube-shaped ingots are then sawed into square wafers. And then the magic happens.

The polysilicon wafers are then placed on a substrate, usually glass, to make a solar cell. A number of cells are then arranged together and set in place to form a panel. The final package is called a module.

That's how a solar panel is made in a nutshell. But hidden in those few steps are hundreds of companies, thousands of patents, and more than a few investment vehicles that can make those in the know a lot of money.

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2009 Solar Energy Overview: Examining The Solar Profit Process

Let's take it step by step.

At the very beginning of the value chain we have polysilicon producers, of which there are a few big players and a few hope-to-be big players. The product at this level is a commodity, so the low-cost provider wins as long as the product is pure and consistent.

Companies here include the Norwegian REC Silicon, a division of Renewable Energy Corporation (OSL: REC), the German Wacker Chemie (Frankfurt: WCH), and the private Hemlock Semiconductor Corp.

Advantages in the poly industry stem from adjustments to levels of purity, using recycled or scrap materials, and vertically integrating (more on that in a bit) to reduce operational costs and improve margins. Remember, poly is a raw material and a commodity-any saved cost creates a competitive advantage.

There are now several companies in the wafer space, but only a few operate as pure or near-pure plays. MEMC Electronic Materials (NYSE: WFR), whose ticker indicates its business, is a big player here and is also a participant upstream in the poly business. Renesola (NYSE: SOL) is also gaining traction.

These first two links in the solar chain have fallen victim to declining silicon prices, which have gone from over $400 per kilogram to $100 per kilogram in just the past few quarters, with $60 per kilogram likely soon. The sharp decline was induced by a sudden oversupply as companies rushed to build new factories to meet rising demand. Just as a glut of supply came online the future demand picture was muddied by the global recession, and prices plummeted.

You'll want to wait until demand visibility returns before dabbling in this sector.

The cell stage is where we begin to see a great deal of participants. It's also where we see the most diversity in business models.

Some companies, like JA Solar (NASDAQ: JASO), focus exclusively on producing cells. The more common approach is to vertically integrate, which means participating in the upstream and downstream segments of the solar market.

Here we have companies like Solarfun (NASDAQ: SOLF), Yingli (NYSE: YGE), SunPower (NASDAQ: SPWRA), Q-Cells (XETRA: QCE), and a number of other major players. The idea is to control the silicon process from ingot to module, cutting costs by not having to purchase individual materials or parts at the spot price or via contract. It also ensures consistent quality and the protection of intellectual property.

The only problem is, it's highly capital intensive to vertically integrate because you have to build factories that produce all the materials involved. The tightening credit markets have led to companies not being able to secure financing, forcing them to stall or cancel expansion plans.

Not being able to expand means not being able to increase capacity, leading to no new sales growth and reduced stock valuations, which we're seeing now.

The last step is the production of a solar panel or module by arranging cells together, binding them, and adding the electronic components. This is what companies get most noticed for, like Suntech (NYSE: STP) and First Solar (NASDAQ: FSLR), though the latter doesn't use silicon at all.

But as we've seen in the other segments of the solar chain, prices are falling for cells and modules too. This excerpt from a recent Reuters article sums it up:

Analysts at HSBC forecast average selling prices for solar systems will drop by about a fifth in 2009 given oversupply and a tighter credit environment, but prices for cells and modules have so far fallen much faster than those for silicon and wafer. Several industry bellwethers, such as cell producers Q-Cells and Sharp as well as module maker Solon have had to revise outlooks.

In the long-term, price reduction is good for the industry because it allows solar to compete with the going rate for retail electricity. But the rapid decline has left most producers holding the bag, sometimes having to sell panels at less than cost or with a negative margin.

The industry, however, isn't going away by any stretch of the imagination. Global installed capacity is still forecast to grow about 33% this year and about 22% in 2010.

There is plenty of growth left for this industry that doesn't even come close to producing 1% of our energy needs yet. Recent government mandates and incentives will ensure homeowners and financiers have good reason to put solar on their roofs or to fund large new installations. That, coupled with a coming national renewable portfolio standard and carbon caps, will spark demand once again.

You'll want to have your traps set by the time the industry rebounds. Many major producers are down about 50% in the last year or so, and are touching new lows this week.

Getting in now and waiting it out could generate much higher than average gains.

Call it like you see it,

Nick

PS. My readers are already taking advantage of the benefits solar and other renewable energy sectors will receive when the money from the stimulus is doled out. Federal offices will begin announcing where the money is going on March 3rd. But you can be in a great position to profit long before then by reading this report and placing your bets before the billions start flowing.

Solar Companies' Stocks

Over the past few months, and particularly over the past few days, solar stocks have been beaten down to previously unseen levels.

One look at the share prices of solar energy stalwarts is enough to leave anyone that's been paying attention absolutely awestruck.

And it's not that hard to figure out what's been going on.

Earlier this year, solar stocks began selling off along with the broader market as a result of Wall Street deregulation and greed that led to a mortgage mess, kicking off a credit crisis that has led to the collapse of numerous storied financial institutions.

All that has been drilled into our heads for months.

The solar sector was certainly not impervious, and fell victim to rampant selling, as did most sectors of the market.

Here's a six-month chart of some solar juggernauts:

Pay close attention to the widespread selling in October and again in November. For me, this is the most startling part of the graph because, no matter how you look at the numbers, there is no way these companies lost more than half their value in two months.

Sure, market conditions are bad. But sales forecasts haven't been slashed more than 50%. Neither have profit forecasts.

Some solar companies have moderately trimmed their outlook for late 2008 and early 2009, but to the effect reflected in the share price.

So what we have is a particularly acute oversold situation, and a few well-positioned companies are begging to be bought and held onto for major profits.

Here's why.

Solar Companies Stocks Forecasts Remain Strong

Given the rosy growth forecasts for the future of the solar industry, the recent sell-off is both illogical and irrational.

Just consider the following raw data offered by Forbes in a recent feature article:

the crystalline silicon-based solar market will grow from a 3.5 gigawatt market today to a 13.8 gigawatt market, a growth of 294% in the next four years
the amourphous silicon market will grow from 550 MW today to 2.8 GW in 2013, a growth of 409% in the next four years
the cadmium telluride (CdTe) market will grow from 480 MW today to 2.4 GW in 2013, a growth of 400% in the next four years
the thin film market based on CIGS and CIS, copper indium gallium selenide and copper indium diselenide, respectively, is will grow from a 41.3 MW market today to 1.2 GW in 2013, a growth of 2,806% in the next four years

To be clear, each of the main four solar sectors is predicted to grow at least 294% over the next four years. The fastest growing sector, CIGS and CIS, will grow an astounding 2,806%.

Traditional energy sectors look like children's playthings when considering this type of growth.

Per the IEA's recent World Energy Outlook, oil demand will grow to 106 million bpd up from 85 million bpd this year.

That's a 25% increase over the next 22 years. Solar is offering no less than 294% and as much as 2,806% in the next FOUR!

Where do you want your money?

What's more, that 25% increase in oil demand won't even be able to be met with traditional black gold. We'll be well past the peak by then. So a portion of oil's future demand growth will have to shifted onto renewables.

Even better, the IEA report also said that "Renewable energy. . . such as solar. . .will overtake [natural] gas to become the second largest source of electricity behind coal by 2015."

The situation couldn't be any more clear.

The time is now to invest—and invest heavily—in renewable energy technologies. They're certain to be the companies powering the globe for many decades to come.

Solar Stocks: Time to Buy

That's why I sent a special alert to the readers of my Alternative Energy Speculator, telling them I'd compiled a report on the five solar stocks that will not only survive these troubled times, but that will go on to provide bountiful returns.

This group of solid solar stocks has it all, including thin film solar manufacturers, raw materials providers, and silicon ingot and cell producers.

By the end of the day, each of the five stocks were up. Four were up in double-digit territory. And this is at a time when the market is as shaky as an old rope bridge and solar stocks are getting bashed left and right.

But that's exactly why I chose these stocks. I knew that given their already oversold state and the high growth estimates for the next couple of years, smart investors would have to start buying them.

You need to be buying them as well. Given the grim situation painted by the IEA's report and the forecast for some sectors of the solar industry to climb nearly 3,000% in the next four short years, there is simply too much upside not to be a part of it.

All you have to do is join the ranks of other investors who read the Alternative Energy Speculator.

When you do, you'll receive the detailed report, Five Solar Stocks for Turbulent Market Times. It contains everything you know to start profiting from these carefully selected and researched solar investments.

You'll also get access to numerous other reports about how to profit from other sectors of the alternative energy markets.

And we'll ship you a copy of the book, Investing in Renewable Energy: Making Money on Green Chip Stocks, which I co-wrote with Jeff Siegel and Chris Nelder.

Don't miss out on another day of these solar profits.

Call it like you see it,

Nick

Top Solar Energy Stocks

A record was set this week for the creation of the most efficient solar panel ever.

Researchers at the U.S. Department of Energy's National Renewable Energy Laboratory (NREL) have successfully transformed 40.8% of the light that goes through their cell into energy.

To put that in perspective, SunPower's 225 panels are the highest efficiency solar panels commercially available for residential use. They're 18.1% efficient.

This illustrates just how far the solar industry has come, and how far it still has to go.

Just a few years ago we were hearing major announcements of 13%, 14%, and 15% efficiencies.

Now, with some R&D and a little investment, researchers are more than doubling the efficiency of the panels that are available commercially.

Rest assured, the technology currently in the lab will make its way to the production line. The industry will continue to mature, become more cost-efficient as well as more energy efficient, and reach the solar Holy Grail now known as grid parity.

Right now though, the top solar energy stocks underlying the industry are not fairing quite as well. There has been some money to be made on the frequent runs and rallies of late, but we really have seen a consistent rise from these stocks in some time.

Undoubtedly, the overarching cause for the current solar scenario is the credit and mortgage crises and the ensuing financial shakeout.

But there are some industry-specific problems that need to be discussed. Once those are out on the table, we can focus on our path to solar profits.

Solar Stocks: Short-Term Problems

Earlier this week, Forbes ran a story entitled, "The Great Solar Shakeout."

The article was succinct and accurate, stating early on:

Despite expectations for rising sales, steadily growing demand over the long term, and another year of exuberant investment from venture capital, the solar bubble has been increasingly overdue for a correction and got a good one over the past month.

Indeed they have.

Solar energy stocks like SunPower (NASDAQ: SPWRA), First Solar (NASDAQ: FSLR), and Suntech Power (NYSE: STP) have lost about 50% of their value over the past three months.

That seems like a conundrum, given the rosy growth forecasts for the thin-film and crystalline silicon solar industries.

The Forbes article serves up a nice answer to that riddle:

Hidden behind these glowing [compounded annual growth rates] CAGRs is a mass of shadows, including the prospect of diminishing government subsidies, an oversupply of modules, rising materials costs and the freeze among credit markets. Combined, these factors help explain why solar stocks over the past 52 weeks and even in October, took a steeper dive than the Nasdaq Composite.

The chance of an oversupply of module and the credit freeze are the two main culprits in my opinion. The fear of diminishing government subsidies has diminished with the election of Barack Obama and the inclusion of tax extensions for solar in the bailout package passed in early October.

Solar Energy Stocks: Long-Term Benefits

What this means for the solar industry is just what the Forbes title implies: a shakeout.

Solar companies will be forced to lower prices to compete, and some smaller and credit-squeezed producers could be forced out.

In order to successfully invest in solar stocks, you'll have to know which companies are best positioned to succeed in this climate.

And the climate isn't all bad.

The silicon-based solar market is still expected to grow 38% annually through 2013, growing from a 550 MW market to a 2.8 gigawatt market.

The cadmium telluride (CdTe) market, which is the technology used by First Solar (NASDAQ: FSLR), is expected to keep pace, growing at a 37% clip through 2013 into a 2.4 GW market.

Even better, the thin film market based on CIGS and CIS, copper indium gallium selenide and copper indium diselenide, respectively, is expected to grow 96% annually into a 1.2 GW market by 2013.

The companies able to compete will be the companies able to succeed.

Top Solar Energy Stocks: Profitable Scenarios

A reduction in solar subsidies in Spain and Germany may lead to a slight constriction of the markets there. But, as mentioned earlier, the extension of solar tax credits here will serve to bolster the domestic market.

The $18 billion renewable energy incentives package, included in the bailout, offers a 30% rebate for residential and commercial solar installations. This will lead to expanded use of solar arrays here in the States, especially in jurisdictions that are already solar-friendly, like California and New Jersey.

What's more, there's a growing possibility that China will enact some form of solar subsidy that would significantly grow their market.

When this happens, you'll want to be invested in the companies that continue to reduce their manufacturing costs by way of design improvement and economies of scale.

To take advantage, I'd be looking at the already established companies that are now trading at a discount.

First Solar and SunPower are probably good bets for a domestic market boom, while LDK Solar (NYSE: LDK) and Suntech look good for the Chinese market.

Next week, I'll be releasing a new solar report that analyzes the solar market based on current and changing conditions. It will also recommend the five most promising solar companies for coming years, and include the investment details on how to capitalize.

But it'll only be available to the savvy investors of the Alternative Energy Speculator.

You have the opportunity to get access to the report next week, but you can have access to it before it's publicly released by signing up to my advisory today.

And you may want to hurry. It's not just solar stocks that my readers are capitalizing on. We've closed two major positions for gains this week on an electric infrastructure company and water services company.

Don't miss another day of the action.

Call it like you see it,

Nick

Solar Stocks on Sale

I couldn't help but cringe as I looked at the markets this morning.

But it wasn't the Dow dropping 500 points in the first seven minutes that did it to me.

Nor was it the Nasdaq Composite shedding 5.5% in the first eight.

It was the blatantly obvious solar stocks on sale that were killing me.

First Solar at $100.

Suntech at $13.00.

The market has erased a year or more worth of solar stock gains in a few weeks. But surely these solar companies haven't lost half their value.

Look at this chart of five of the leading solar stocks on the market:

Here we have a three-month chart of SunPower (NASDAQ: SPWRA), First Solar (NASDAQ: FSLR), Suntech Power (NYSE: STP), Q-Cells (Xetra: QCE) , and Canadian Solar (NASDAQ: CSIQ).

Each have lost in the neighborhood of 50%, with Canadian Solar slouching a bit more.

Here's the thing: All these stocks, and many more that aren't pictured in the chart, are going to return to their previous trading levels.

Maybe not today. Maybe not next week. But three or four quarters down the road, when bad investments have worked their way off balance sheets and credit begins to flow more easily, these solar stocks will once again reign supreme.

Let's do some simple math to see what that means for you, using First Solar as an example.

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A Solar Stock Case Study

Once upon a time, when stalwart banks weren't partly nationalized, First Solar climbed from a measly $25.00 per share to about $311 per share in May of this year (2008).

After the housing crash, and the resultant financial fallout, First Solar now trades in the $120 range, but has fallen as low as $102.50.

This stock will certainly return to the $300 benchmark, but in effort to remain conservative, let's assume a return to $250 in the next year or so.

If First Solar stock was to climb from today's level of $120 to $250, the savvy investor that bought in today would be sitting on gains of exactly 118%. Not bad at all.

The same holds true for many other solid solar stocks on sale. Any major solar company that has taken a 50% hit and eventually returns to previous levels will guarantee at least a 100% return—as long as you have enough patience.

Solar Stocks: The Rationale

It seems that amid the economic turmoil, traders have lost site of medium- and long-term forecasts, and have completely thrown the fundamentals out the window.

Many solar stocks with bright futures have fallen victim to unwarranted selling and undervaluation as the broader solar market shook out.

But energy demand growth projections still stand. We're still going to need additional amounts of energy, and so the current solar growth projections still stand.

So it's hard to believe that, if the long-term solar forecasts are still positive, that the major stocks should be trading at such low levels.

Here's what I mean.

Under a conservative growth scenario, the solar energy industry will grow 39% by the end of 2009. By 2012, it will grow another 135% from 2007 levels.

I'm talking about the entire global solar industry, which has gone from 877 installed megawatts in 2000 to about 9,797 megawatts (or 9.8 gigawatts!) today. By 2012, over 19,600 megawatts will be installed.

While some of the bulletin board solar stocks and less-liquid solar companies could shake out, the established one are going to be providing the solar ingots, wafers, cells, and modules needed to sustain that kind of rapid solar growth.

That means increased sales, higher bottom lines, and increased valuations for the companies that succeed in the coming alternative energy economy.

Which leads me to another point: Why else would Big Oil be trying to break into the alternative energy industry if there weren't major profits to be had?

All the major oil companies have recently ramped up their alternative energy initiatives, with many of them launching PR campaigns to get their new green word out.

You can bet this isn't a sudden change of heart. It's about generating revenue. And alternative energy is generating revenue.

The industry was worth $33 billion back in 2004, but will climb to $600 billion by 2020.

Big Oil can try to get a piece those profits, but they won't succeed.

It's the established companies, like solar stocks mentioned earlier, that emerge victorious in the alternative energy sector.

You should be learning how this energy boom is going to play out, and invest accordingly.

To do that, I have a new report that details the staggering number of investment dollars about to pour into renewable energy. It also chronicles how Big Oil will be unsuccessful in trying to break into the industry in a meaningful way and outlines how you can invest in the alternative energy companies—including solar stocks—that will be delivering energy profits for decades.

You don't want to miss this one.

Call it like you see it,

Nick

The Best Solar Stocks

Going over the numbers from the last few days, it's easy to become a bit manic. Even the best solar stocks have taken about a 10% hit over the last four trading days.

Take a look:

Suntech Power (NYSE: STP), -9%
SunPower (NASDAQ: SPWR), -9%
First Solar (NASDAQ: FSLR), -11%
Solarfun Power (NASDAQ: SOLF), -14%

There's a legion of reasons for the fall. And, once you understand them, it's possible to make a killing on the resurrection of solar stocks.

The overarching reason for the fall is the same impetus that sparked chaos in the rest of the market: a government bailout (so much for free markets, right) of Freddie Mac and Fannie Mae, followed by the now well-documented issues at Lehman (NYSE: LEH) and Washington Mutual (NYSE: WM).

That's the broad reason for the stock market's recent plunge.

On the solar side of things, there are some other, nuanced catalysts for the drastic downturn, most of which are unknown to retail investors.

The reason for the massive solar sell-off over the last few days is news that there could be an oversupply of panels in 2009, which would drive the price down, resulting in lower margins and revenues.

After an industry conference in Valencia, Spain last week, many solar manufacturers cited a 5-10% decline in prices over the next year. However, most of the companies said demand will remain healthy.

But there are some variables that aren't being discussed...

Solar Stock Drivers

The most obvious aspect and one that's not being discussed, is the all-but-certain extension of the federal solar energy investment tax credit (ITC). Fears that this vital piece of policy won't come to fruition have certainly weighed on traders' minds, adding to the already negative pressure on the sector.

Thing is, the credit will be extended.

A note from Piper Jaffray analyst Jesse Pichel this morning had the following to say about the situation:

Expect several energy bills to be introduced over next few weeks that all include solar ITC extension.
We remain optimistic that political pressures may allow solar support to gain momentum.
If above mentioned bills fail there appears to be support for at least a one-year ITC extender at which time the new administration would likely introduce a more comprehensive energy bill with solar support.

Mark my words. The day the solar ITC is extended is the day numerous solar companies surge 25% or better. And I have a feeling that day isn't too far off.

Another solar variable that has been glossed over is the feed-in tariff debate currently happening in Spain.

For those of you who don't know, a feed-in tariff is what Germany used to initiated its now world-leading solar program. A feed-in tariff forces a utility to buy excess electricity generated from solar systems at a higher rate than retail electricity. After the industry is established, the feed-in tariff is weaned.

This model worked beautifully in Germany, which is now the model solar market.

Spain has also had a successful feed-in tariff. So successful, in fact, that the government wants to cut the amount of eligible solar systems by more than 66%, from 1 GW per year to 300 MW per year—a drastic cut, to say the least.

But the Spanish Energy Ministry submitted a draft proposal yesterday calling for a 500 MW cap on projects available for the feed-in tariff.

The official decision won't be made until October, but the indication is that the Spanish market won't be as weak as expected, so investors should start to regain confidence in the companies that have a major stake there, including Yingli Green Energy (NYSE: YGE)

Germany for its part, resisted cutting its feed-in tariffs last December, delaying the decision until 2010.

Solar Stock Guidance

What you should be doing is picking up some of the best solar stocks on the cheap, especially the big boys in anticipation of the return of favorable conditions.

SunPower (NASDAQ: SPWR) around $80 and Suntech (NYSE: STP) around $40 are incredible bargains.

LDK Solar (NYSE: LDK) is also ripe for a nice move, after announcing an 11-year deal with industry leader Q-Cells (XETRA: QCE) for the processing of solar-grade silicon.

Other solar stocks that have been knocked down a few pegs are:

JA Solar (NASDAQ: JASO)
Trina Solar (NYSE: TSL) and
ReneSola (NYSE: SOL)

That's how the solar situation is shaping up. Be sure to get some shares now, while they're still trading at an incredible discount.

For more guidance on solar stocks, and all things alternative, check out the Alternative Energy Speculator. That group of savvy investors is always ahead of the renewables' curve.

Join today, and you'll get a copy of the new book Investing in Renewable Energy: Making Money on Green Chip Stocks.

Call it like you see it,

Nick

Solar Stocks: Trends & Market Outlook

Solar stocks are completely undervalued. And big money stands to be made. The following is a current profile of the industry, along with what to expect going forward.

The Solar Industry

Let's start with the basics.

The global solar industry has grown 849% over the past eight years, from an installed capacity of 877 MW in 2000 to 8,325 MW at the end of 2007.

That breaks down to a compounded annual growth rate (CAGR) of 37.9% for the same period.

Folks, not many things grow 849% in eight years. For perspective, the Dow Jones Industrial Average gained only 12% during the same time.

Broken down by country, or by region, some interesting trends also emerge, especially when it comes to the countries with the highest growth rates for solar installations.

For example, I bet you'd never guess that the United Kingdom ranked among the top five countries for solar installation growth over the past eight years.

Here's the full list of those countries, along with their respective solar installation annual growth rates:

Spain, 73.3% CAGR
Germany, 65.3% CAGR
United Kingdom, 36.9% CAGR
Indonesia, 35.4% CAGR
Japan, 31.5% CAGR

That's the story for the past eight years. Some savvy investors made a lot of money, but it's nothing compared to what'll happen the next eight years.

Solar Stocks Outlook & Industry Forecast

Under a conservative growth scenario, the solar energy industry will grow another 39% by the end of 2009. By 2012, it will have grown over 135% from 2007 levels.

Worth noting is that the compounded annual growth slows during the period from 2007-2012, to 18.7%—down from 37.9% for the period from 2000-2007.

This is more an indication that the industry is maturing than it is an indication of slower growth. This is due to the volume of solar module being installed.

For example, 19,624 MW of solar energy capacity will be installed in 2012. Only 9,797 MW will be installed this year.

So the percentage growth of installs is slower, but the amount of panels being produced and installed is much greater. This is great news for investors.

Interestingly, the countries in which a good portion of these future panels are going to be installed is different from the countries leading the way over the past eight years.

This is due to saturating markets, policy leadership, and the price of retail electricity if different areas.

The five countries leading the way in the next five years are, along with their estimated CAGR:

China, 35.8% CAGR
Thailand, 35.7% CAGR
Indonesia, 34.9% CAGR
India, 34.3% CAGR
South Africa, 29.7% CAGR

The U.S. comes in fifth for anticipated growth over the next five years, with good opportunities also emerging in the Mediterranean basin and Australia.

Preparing for Solar Industry Growth

To get a grip of how the solar industry is playing out, it's helpful to first see who the largest players are.

Here's a chart of the top solar cell producers by market share for 2006-2007:

I will tell you, however, that Q-Cells (XETRA: QCE) has since taken over the top spot.

Sharp (TYO: 6753), Kyocera (NYSE: KYO), Sanyo (TYO: 6764), Mitsubishi, and BP Solar (NYSE: BP) cannot be invested in as pure solar plays, so I immediately dismiss them. I'm only after the pure plays here.

That leaves Motech (TAIWAN: 6244), SolarWorld (XETRA: SWV), and Suntech (NYSE: STP) if you want to play with the big boys. Schott is a special case that we'll get to in a minute.

Motech is a Taiwanese solar company that reported a record $348.5 million in revenues for the fiscal year ended June 2008, though net profit actually fell 31.9% to $2.78 million.

The company is engaged in the supply of high-quality, low-cost crystalline solar cells to Photovoltaic Industry and module manufacturers worldwide. They've signed major silicon agreements with Nitol (now partially owned by Suntech) and DC Chemical—two of the largest players in the silicon supply game.

If you trade internationally, keep an eye on them.

SolarWorld is a vertically integrated solar company based in Germany. They're involved in the entire process, from silicon production to module manufacturing. And, like Motech, they've also signed a silicon supply deal, worth $580 million, with DC Chemical.

SolarWorld has also built and opened their own silicon production plant.

But Suntech is my favorite play here. It's traded domestically, so everyone has access to it, and it's been performing beautifully. This is a company that reported a 61.6% increase in net profit from 2006 to 2007.

They boast highly efficient cells, operate across nearly all sectors of the market, and are properly position in both China, the U.S., and Australia.

Coming soon, we'll have access to Schott Solar.

The company announced plans to raise $740 million through an initial public offering last week.

No word yet on when they will list, but you can bet Green Chip International will be all over it, along with the rest of the opportunities in the international green markets.

Call it like you see it,

Nick

PS. Company and industry data and charts provided by GlobalData.

Solar Energy Companies

Oil isn't the only overpriced commodity.

Silicon, the raw ingredient for solar panels, is also in short supply and being sold for near-record prices. So precious is the metal that in some recent cases it has been sold for as much as $500 per kilogram at the spot price.

Those who've negotiated long-term contracts may enjoy a slightly lower price.

For some time now, silicon procurement and prices have been a driving factor behind the success of solar panel producers that use silicon-based technology.

If a company has a steady supply, secured by contracts, it's generally been less volatile than its peers struggling to secure feedstock on the spot market.

Some solar energy companies that have been buying silicon at spot prices have seen those increased costs reflected in the form of decreased margins. And not only do decreased margins look bad on quarterly reports, in many cases they're also cutting into net profit. Not a good situation.

In the face of high raw material costs, the companies that use the least amount of silicon, or the ones that use none at all, have been the companies to be in.

Naturally, solar companies that specialize in silicon production and refining have also found good success.

Let's take a look at a few of those success stories.

Solar Energy Companies and The Silicon Supply Supernova

You may already know what's coming, but the most clearcut example of a company prospering from silicon is MEMC Electronic Materials (NYSE: WFR). I mean, their ticker says it all: WFR, short for wafer—the silicon building block of a solar panel.

If you bought that stock two years ago, you'd now be up 80%. But had you bailed late last year, as the markets were just beginning to tank, you could've made 174%, as the stock topped out near $96 around Christmas time. Take a look:

You can see how WFR made its run parallel to the silicon supply crunch that began in 2005. This is essentially the same way oil exploration and service companies have risen along with associated oil supply concerns.

The second example of how silicon-related companies have skyrocketed comes from a relative newcomer.

Before mid-April, you'd have been hard-pressed to find someone who had even heard of ReneSola Ltd. (NYSE: SOL). The company IPOed in January and traded down until some promising news started surfacing during the fourth week of spring.

On April 15^th, the company announced two six-year wafer supply agreements for 105 MW each with Ningbo Solar Electric Power and Eoplly New Energy Technology, both solar cell manufacturers.

On April 17^th, the company increased its output and revenue guidance to 320 MW and $550 million, respectively. That day, another six-year, 105 MW agreement rolled in from Shenzhen Topray Solar, another cell manufacturer.

What's more, the company was busy expanding upstream in the silicon value chain as they ventured into polysilicon manufacturing. As we've seen time and time again, The Street loves vertically integrated solar energy companies.

Renesola leaped 113% in about one month's time, from mid-April to mid-May. It rests now at about $17, but I've seen 12-month estimates on this one as high as $40. Check it out:

But that could be nothing compared to. . .

The Next Round of Silicon-Induced Profits

Here's why.

For all of WFR's success, they are not the leading producer of silicon feedstock. Here are their recent output numbers and future estimates:

2006: 4,100 metric tons
2007: 4,875 metric tons
2008: 6,675 metric tons
2009: 8,000 metric tons
2010: 8,000 metric tons

That's enough to make it the world's fourth or fifth largest producer, depending on who you ask. I'd call it fifth, if you take into consideration the estimates through 2010.

And while WFR could see increased upside as the silicon crunch continues to play out, I'd be putting my money on the fourth largest producer, which has a chance to double in the next 12 months.

In case you're wondering, the largest producer, Hemlock, is privately held. The second-largest, Wacker Chemie (XETRA: WCH) has been volatile lately. And the third-largest, Tokuyama (TYO: 4043), is too diversified to invest in based solely on silicon merits.

But the fourth-largest producer is a gem in the making. Its silicon wafer division is sold out for 2008 and 2009, which translates into pretty firm revenue guidance. It also has an order book value of $6 billion.

What's more, this company's output numbers blow WFR's out of the water. They're anticipating production of 7,000 metric tons in 2008, ramping to 12,500 metric tons in 2009.

Plus, the company is also vertically integrated—it makes wafers and modules as well. Pending a decision to build a plant in Singapore, the company could reach a 2.3 gigawatt output of wafers in 2001, which is very impressive.

I'll be recommending this solar energy stock to members of Green Chip International early next week. But you have to be a member to get in on it.

In addition, I'll be recommending a German solar integrator along with it. Integrator, in the solar energy world, basically means installer.

And as such, the company is not tied to any one technology or feedstock. Specializing in both rooftop and utility scale installations, this company is more than well-positioned profit from a still robust German market (people are trying to get as many panels installed as they can before the subsidy reduction in 2009) and from a set-to-explode Mediterranean market.

In several locations surrounding the Mediterranean, solar has already reached grid parity—the point when solar-derived electricity is cost competitive with local peak utility rates. So installations in that area are about to skyrocket.

You can get in on both of these opportunities. Simply take a few minutes to read a little more about the service and become a member. Then, once I recommend the stocks, you'll get the detailed information right to your inbox.

These are easy profits, folks. Don't miss out.

Call it like you see it,

Nick

P.S. Green Chip International recommends renewable energy companies based outside the U.S. While some of them trade on domestic exchanges, others only trade in their native countries. Keep this in mind before you become a member.

Solar Cleantech

We know by now that one of the main reasons for oil's recent dramatic rise was the weakening dollar.

Until September 2007—as Chris Nelder pointed out the other day—oil was rising for fundamental reasons, like tight supply or low reserves.

But we now know that a weakening dollar was more than partly to blame, and that oil's price had to increase merely to retain the same level of worth.

Simple logic, then, would deduce that same phenomenon is occurring across multiple sectors.

But as you'll see, that's simply not the case.

Weak Dollar Doesn't Affect Solar

Many armchair pundits have assumed that a depreciated dollar would impact the profitability of solar cell makers in the first quarter of 2008.

And yet, for the past week or so, many solar stocks have simply blown it out of the water.

Ascent Solar Technologies Inc. (NASDAQ: ASTI), for example, climbed from $8.02 on March 20^th to $17.10 on March 31^st—a 113% run in just eight trading days.

Spire Corp. (NASDAQ: SPIR), for its part, climbed from $10.36 on March 20^th to $17.35 on March 27^th—a 67% explosion in only six sessions.

Rest assured that those types of advances aren't just to cover a dwindling dollar. They were rising for a reason.

Many solar cell makers have boasted that the dollar's waning simply hasn't had an impact on their core businesses.

Since the word's largest solar markets are abroad—Europe and Japan—many of the payments are made in currencies other than dollars.

On the other hand, the largest market for oil is—no surprise here—the United States.

Essentially, the oil market is spinning its wheels, charging higher prices for the same amount of product while the cleantech industries—solar in particular—pass them by.

Ironically, the same thinking that has led the U.S. to be a slow adopter of clean energy is now also causing acute inflation of oil prices. And prices aren't the only thing increasing. So is consumer disgust with the oil companies.

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Solar, Cleantech and Big Oil

By now, you're in tune with the groundswell against Big Oil. But you may not know that growing distain is translating into increased dollars for the cleantech industry.

And not just the cleantech industry, but the products being used a bridge to it—natural gas, carbon capture and more efficiency.

Just last week we saw truckers ride their brakes to show their aversion to high diesel prices.

But more and more, truckers and trucking companies aren't just slowing down to show their concern. They're beginning to pour millions into more efficient engines, hybrid big rigs and engines that run on alternative fuel.

We've also recently seen Congress grill Big Oil execs on their companies taking record profits while Americans struggle to keep their tanks full. A reoccurring theme during that questioning was why a greater share of their profits weren't directed toward cleantech investments.

And the most revealing news of late is a survey conducted by the Economic Development Authority in Fairfax, Virginia in which respondents actually preferred and energy solution to a cure for cancer.

The growing uproar against oil and for cleantech is now dictating cash flows as well.

Last week, 18 states opted to sue the Environmental Protection Agency for failing to limit greenhouse gas emissions from fossil-fuel burning cars and trucks.

The same week, two new efforts to extend the solar Investment Tax Credit were introduced in the House and Senate. The extension of those tax credits would do wonders for cleantech profitability and stock prices.

In fact, just the introduction of one of those bills sent the entire industry soaring last Friday.

And the uptick continued today. Some cleantech plays flew 10% or even 15%.

Folks, you may be paying significantly more for the same amount of oil, but the cleantech industry is the exact opposite.

Oil companies now have to spend more to find every drop of oil they produce because, let's face it, we're running out.

In cleantech on the other hand, production costs are coming down. And you can still get good deals on many of the associated stocks that are ready to blow it out of the water.

Until next time,

Nick

PS. There are many technologies involved in building the bridge away from coal and oil. Pure green technologies like wind, solar and geothermal are delivering valuable solutions as well as hefty returns. And so are the stop-gap technologies like natural gas engines, energy efficiency and carbon capture. The Alternative Energy Speculator is profiting from all these angles. And my latest recommendation is up 85% in three weeks. To learn more about the Alternative Energy Speculator, click here.

Solar Energy Tax Credits

On Wednesday, the House approved $18 billion in new taxes on Big Oil. The plan is to take that money and put it towards tax breaks for wind, solar and other renewable energy sources...over a ten-year period.

Now as much as I support the full integration of renewable energy, I'm also the last person who would advocate penalizing any company for making a boatload of money.

And that's exactly the argument opponents of this bill are using to send it on the fast track to oblivion.

The only problem is, it's nothing more than another lie, paid for by, well, you—the taxpayer.

Here's the deal...

Back in 2002, Congress gave a subsidy to manufacturers that didn't include Big Oil. But the WTO had ruled that the subsidy was a violation of trade accords. So Congress then came up with a provision that lowered the corporate tax rate from 35% to 32%. This did include oil companies.

The recently passed House bill essentially eliminates that tax break for Exxon Mobil, Conoco Phillips, BP, Royal Dutch Shell and Chevron.

So before we go any further, let's get this straight.

The bill does not call for sticking Big Oil with an $18 billion tab. It calls for rescinding a tax break.

Let Them Pay!

Renewable energy opponents often make the argument that if it can't work without subsidies and tax breaks, then it must not be a good business model.

We couldn't agree more.

So let's cut every last cent that you and I pay to the oil companies via all those tax breaks, subsidies and overall support

Why not?

I don't know about you, but why should any of us have to pay to secure the shipping lanes so they can move that oil from point A to point B. That's an operational expense, folks...not a justifiable tax!

Let the oil companies pass that cost—a cost they must incur to do business—on to the consumer.

Let them pay to find more oil too. That's not our job.

In 2006, the US (taxpayers), loaned more than $2 billion directly to oil companies to help them extract, refine, and transport oil in Algeria, Columbia and Russia.

How's that make you feel?

Let's cut the crap, and let the oil companies operate without that golden crutch.

Let the price of gas soar to $15 a gallon.

Let's watch everything we ship, manufacture, eat and wear quintuple in price, and see how fast we level that playing field.

Of course, much of this recent $18 billion debate could've been avoided had this ridiculous stimulus plan (or what I like to call the last band-aid on a sinking ship) included funding a sustainable energy infrastructure that would reward such an investment for decades to come.

You know, instead of sending out a bunch of $600 checks that will depreciate in value from the time they're printed to the time they arrive in your mailbox.

Perhaps I'd be a bit more excited about it if it were in Euros!

But enough of the ranting.

We're here to make money, right?

So let's do just that.

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Seasonal Solar

Over the past few weeks we've watched the entire solar sector get hammered.

Some of it has to do with the overall condition of the market. But there's also a lot of hesitancy on the part of investors because Congress has yet to extend the federal tax credits for solar.

The credits are set to expire at the end of 2008. And few seem willing to jump back in until those credits are extended.

Though in about 3 to 5 years, none of this will really matter anyway. Because the cost of solar will be competitive with natural gas and coal, thanks to increasing efficiencies, lower production costs and future global warming legislation that IS going to happen, and WILL affect the profitability of utilities operating coal-fired power plants.

Of course that still doesn't change current market conditions.

But while solar will continue to experience a bumpy ride in 2008, there is one angle you can play this year that will prove to be a very profitable angle in the second and third quarter.

Profiting from Solar Installations

While we are seeing a lot of folks shying away from solar right now, installers are gearing up for a record year.

The tax credits are still in place for the next ten months. And there's a massive backlog of installation contracts in California-the state with SB-1, the Million Solar Roofs Bill that was signed into law in 2006.

As the Golden State continues to move forward with its goal of one million solar roofs, installers are guaranteed a robust marketplace for the next eight years. And that's with or without the federal tax credits

And the best part is, the few publicly-traded companies that install solar have been caught up in the recent market meltdown...providing bargain hunters with an excellent opportunity to pick up shares at ridiculously low levels.

Our favorite, and really one of just a handful, is Akeena Solar (NASDAQ:AKNS).

Akeena is one of California's largest installers. But its standardized installation system (a system that saves massive amounts of time and money) is what separates it from the typical installer. As well, it's aligned with the biggest solar manufacturers in the world, including SunPower, SunTech and Kyocera.

The stock is trading below $6.00 right now.

But in a few months, as we head into the busiest installation season (spring and summer), we're going to see this company land a wealth of new contracts, drawing the fence-sitters in to push the stock back up to levels closer to $9.00 a share.

You can read more about Akeena Solar at Green Chip Stocks.

To a new way of life, and a new generation of wealth...

Jeff

Thin Film-Solar's Holy Grail

Baltimore, MD-The solar power doom and gloomers are at it again. But then again they can't really help themselves. After all, the price of both oil and natural gas both fell sharply last week. And in doing so it gave them a sort of convoluted beachhead from which to roll their eyes at solar.

But what these flat earthers don't seem to understand is that there is actually a bona fide revolution going on in solar power. And it's the kind of revolution that is quickly beginning to disconnect the industry from the chains have that shackled it to the price of a barrel of oil or its equivalent in natural gas.

Now for those of you whose eyes glaze over at the mere mention of solar power, let me tell you this about the new solar: it's not your grandfather's solar and it's certainly not the 70's anymore either.

And no matter how much it may be ingrained into your mind that solar power is just some sort of distortional fantasy, nothing could be further from the truth.

Because not only have the times themselves changed, but they are in the process of being transformed in ways that will alter the way we think about solar forever.

Leading this stunning transformation, as usual is a next generation technology. It's called thin film solar.

It's smaller, cheaper, and more efficient than its silicon based predecessors and it now stands poised to shake the industry from out of its doldrums.

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In fact, its emergence in to the market is expected to help the solar industry grow from $11 billion in 2005 to $51 billion in 2015 according to a projection by Clean Edge Inc., a market research firm that is focused on clean technology.

And since those numbers are hardly the types of figures that you can roll your eyes at, numerous companies are working to stake themselves a thin film claim.

Leading the way in this space is Nanosolar Inc., a private Palo Alto company that was founded with a little seed money from the Google guys themselves, Larry Page and Sergey Brin.

Founded in 2001, Nanosolar recently made the type of an announcement that changes landscapes. In fact, just last June the company announced that they were going to build the world's largest factory for making solar power cells.

And while this announcement may have failed to move some, to the solar power industry, the news was a tsunami. In one fell swoop, the nation's solar manufacturing process would triple, making the U.S. the second largest solar manufacturer. Only the Japanese would be larger.

Even more stunning was capacity of the plant itself. According to Nanosolar's CEO, Martin Roschesien, the plant will turn out enough solar cells each year to generate 430 megawatts. That's enough electricity to power about 325,000 homes.

Once started, the Nanosolar plant will produce a new type of material that will blow away the existing silicon based panels at 1/10 of the cost. And in doing so, this new technology promises to make solar competitive with fossil based fuels- even if those fuels drop drastically in prices.

In short, it is the solar equivalent of the Holy Grail.

All of which makes Nanosolar a true pioneer in their industry. For four years their engineers had been busy working on solar cell prototypes. The pay dirt, Roscheisen says, is that Nanosolar's engineers have created the types solar cell technologies that are now poised to shake the industry from its reliance on costly silicon based panels.

Of course, these revolutionary developments couldn't possibly have come at a better time.

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With the Middle East currently in a state of constant turmoil and the price of oil tied to its whims, it looks as though solar's day in the sun may finally have arrived.

"This is a good space", Roscheisen says. "The market is very, very, large."

Venture capitalists seem to agree. Once primarily the realm of an environmental fringe, solar has suddenly become a hot commodity. And the very folks that made fortunes in the 1990's during the internet boom are now among its biggest advocates.

But what made all of this promise possible has been the creation and improvement of thin film technology.

In the course of their work, Nanosolar engineers developed a way to imbed a compound called CIGS into thin polymer films. This metallic compound is the key to the entire process. It contains copper, indium, gallium and selenium. Without these metals the production of these films is impossible.

The important note here is that these films are without silicon, a factor that allows them to be more cheaply produced.

But Nanosolar's news didn't end with the announcement of its record setting factory. Recently the company also announced that it had signed a long term agreement to develop large scale solar power systems with Conergy an experienced worldwide solar contractor.

The agreement prompted this comment from Cameron Moore, regional Head of Conergy Group in North America "We are looking forward to a successful partnership with Nanosolar. With every tenth solar system installed worldwide and an innovative product portfolio, Conergy has established itself as major supplier in the growing photovoltaic market. Conergy's extensive engineering and system competence matches perfectly with Nanosolar's best-in-class technology".

But Nanosolar, of course is not alone. Many other thin film start ups are also competing in the space including Innovalight, Konarka, Miasole and Heliovolt.

Long time solar companies, such BP, Royal Dutch Shell, and Honda are also working to establish themselves as thin film players.

In fact, in February Royal Dutch Shell sold its crystalline silicon business to SolarWorld choosing to concentrate its efforts solely on thin film instead.

Even Applied Material has gotten into the act. The chip maker recently bought Applied Films for $464 million last May as part of its effort to establish a toehold in the emerging technology.

So while some may still have a hard time taking solar seriously in light of falling crude prices, their math may cause them miss the boat. Solar power it now seems is ready to leave the harbor. And when it does it will have little or nothing to do with crude.

-Steve Christ

Discounted Solar

The silicon shortage that has continuously monopolized the anti-solar argument for the past two years has actually done more to spur innovation and further the technology than actually deter the market from jumping on board.

Rather than solar investors running for the hills every time silicon shortage reports come up, savvy Green Chip investors have simply turned their focus towards those companies using the silicon shortage to their advantage.

A perfect example is Evergreen Solar (ESLR:Nasdaq)

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In an effort to conserve silicon supplies while remaining competitive in the photovoltaic market, Evergreen Solar patented a manufacturing technology that produces its solar cells with just two-thirds the silicon that conventional manufacturers use.

Ultimately, this manufacturing process produces nearly one-and-a-half times as much power per pound of refined silicon as conventional methods.

In less than two years, Evergreen Solar has shot up over 600%.

But Evergreen Solar isn’t the only silicon-conserving game in town.

Today, some of the most impressive R&D in the world of solar is coming from labs that are perfecting CIS thin-film solar technology.

CIS thin-film solar is based on Copper, Indium and Selenium – a cell combination that while producing a lower total energy output than crystalline solar cells, is also much cheaper to manufacture…and doesn’t rely on silicon!

One of the leaders in CIS thin-film is Royal Dutch Shell. And its CIS solar has achieved some of the highest efficiency ratings for thin-film yet.

And just a few weeks ago, a small Massachusetts-based upstart called Stellaris Corporation won MIT’s Ignite Clean Energy Business Presentation. Now the company is negotiating with investors to raise money to begin manufacturing its solar panels which the company claims can be produced at a 40% discount to traditional panels by using special lenses to concentrate the sunlight as it hits the panel.

The idea is that by amplifying the light, the company can use less photovoltaic material.

The company intends to use thin-film technology as well.

For the latest in thin-film solar technology, as well as the companies profiting from silicon shortages, visit Green Chip Stocks now.

-Jeff Siegel