03 January 2008

Clean Tech: Solar Year or A Blister in the Sun?

I've spent the better part of this evening reviewing my position on First Solar, in light of all the buzz around solar stocks. Are we heading for another bubble -- call it a blister in the sun, to pay homage to the Violent Femmes' classic.

Should it trouble me that even formerly overlooked companies are getting a boost? The overwhelming consensus is not yet.

VentureBeat reported today that BCC Research has released a report with detailed predictions for some specific sectors of the solar market, calling for a three-fold growth in the solar industry in the next four years.

According to the report, Photovoltaics: Global Markets & Technologies (EGY014F) from BCC Research, the global market for photovoltaics (PV) is expected to be worth $12.9 billion in 2007. This is expected to increase to over $32.3 billion by 2012, a compound average annual growth rate (CAGR) of 14.9%.

Global shipments of PV cells/modules reached 2,875.1 megawatts (MW) in 2007. They are projected to grow by 28.6% to reach 3,697.3 MW by 2007, and by a CAGR of 30% to reach 13,724.4 MW by 2013.

"Thin film cell manufacturers such as Nanosolar and Heliovolt," VentureBeat reports, "will grow some 45 percent each year. Use of multicrystalline silicon in standard photovoltaics, meanwhile, will grow at 285 percent annually, rapidly taking over the market share of more efficient, but also much more expensive, single-crystal silicon."

All good, right?

Some don't feel that way and are predicting a shakedown in solar companies, with perhaps some consolidation and restructuring.

Even First Solar, the darling among solar stocks, which has increased dramatically (over 880 percent) since its IPO, has come under fire. Some are short-selling, saying it's over-valued, others are saying it will implode because of the limited supply and associated increased costs of Tellurium, which is critical to its thin film production.

(For an interesting read on Tellurium, check out this post (The Telluirum Supernova, and the more than 30 comments, which provide arguments on both sides of the debate.)

And still others are saying this is the year for solar stocks and that the sun will never set...

For now, I'm staying long with FSLR. Why?

First Solar is the leader in Cadmium Telluride (CdTe) thin film technology and has already achieved an impressive 9 percent conversion efficiency with its modules. In addition, its management on the December conference call stated they are "trying to achieve 90 percent confidence" in obtaining a 5-year supply to ramp up their proposed new facilities, which strikes me as sound planning rather than panic.

Finally, as one commenter ("Pouting Thomas") on the Tellurium Supernova post remarked back in early December, First Solar is basically a glass panel manufacturer -- indeed one of the best -- so even if there are significant advances in printed, flexible PV films, they'll still need to be sandwiched between inexpensive glass for strength and protection. In this, too, First Solar appears to have a good opportunity to adapt.

That said, I will keep a close eye on FSLR for the next 6 months. Let's hope this isn't a blister in the sun and we can go wild for a while LONGer.

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