Investment in Solar
Solar commentary these days has become hugely bullish as solar stocks touch new highs. Sunpower, Trina Solar, Canadian 
Solar are all reaching their 2009 levels, as solar demand skyrockets in Japan, China and USA. I think that 35 GW will be easily reached this year, given that there are indications that China is really going the whole hog in boosting solar energy installations through FIT and other subsidies. Even though most solar companies are still making losses, their margins and revenues have shown a rapid improvement.
Solar panel prices have started to rise albeit slowly and supply has not increased. This means that the supply demand gap is easing, which is leading to an increase in prices for all solar components such as wafers, cells and panels. Energy Trends recently said that they foresee a shortage in polysilicon in Q114, while Solarbuzz is saying that they see the industry come to demand supply parity in 2014 with 50 GW of demand.
The Pros and Cons of the current solar situation:
Pros
1) Capacity is not increasing despite solidly increasing demand. Tier 1 solar panel makers like Yingli and Renesola are preferring to outsource production to smaller solar Tier 2 makers, as they run out of capacity. This is helping the companies to maintain their capital position and keep the indusry’s supply growth in check.
2) Tier 2 makers are going out of business – The industry has consolidated, with many of the smaller and fringe players having gone out of business. The Chinese government is not giving support to the smaller players who are finding themselves left out to dry without capital.
3) Solar parity is slowly becoming a mainstream idea – There is hardly any country which is not seeing a big solar boom these days as solar energy becomes increasingly competitive. Solar supply chains have matured and people can access solar products even in remote areas.
Cons
a) Many companies are still in the red despite a boom. The solar crash in 2011 and 2012 had taken the prices to such low levels that they are still near the cash costs. There are only a few companies that have net profit margins even though gross margins have become positive for most.
b) Even fringe solar stocks are going up – Small solar companies without strong fundamentals have also become multi-baggers as investors pour money into everything solar. This means that some investors will get burned again.
Solar energy growth is inevitable given that it is the only energy which is seeing decreasing costs every year. It is also green, distributed and scalable. However, investing in solar energy is extremely dangerous as the whole sector is super high beta and bad companies will go bankrupt very fast – ask Q-Cells, Energy Conversion Devices investors. They were multi billion dollar companies once.
Google+Solar PV module production is set to reach the 50GW milestone in 2014, according to the latest NPD Solarbuzz PV Equipment Quarterly report.New analysis by the market research firm follows on from its recent major forecast update of global end demand reaching at least 45GW next year and potentially reach 55GW and highlights the significant recovery in the PV industry after two years of overcapacity.
With controlled capital spending expected to target adding module assembly capacity, dedicated tier 1 solar cell manufacturers are expected to follow suit and add capacity proportionally to meet integrated module manufacturers’ increased production.
