On second thought, let's not go to Camelot!10. June 2010 By: Mathieu Girard
Now that I look upon my first day spent at the fair, and mostly my first blog, I quickly came to realize that I must have sounded quite optimistic, bordering the utopium of someone who encounters a self-acclaimed prophet and drinks at the fountain of his (or her) words.
But rest assured that I am not. As I mentioned earlier, there are downsides to solar energy that are primordial to consider, especially when figuring out whether or not to invest in a particular technology, or firm. Especially in cases where the other participants taking part seem scared to be, to use a rather rough analogy, hoisted by their own petards. By that I mean, the uncertainty and (relatively) limited profitability surrounding investments in new energy technology seem to constantly underline the possibility of investors to create an artificial bubble in which they could rapidly lose what was previously invested.
While such bubbles recently happened in various industries, investors in solar and photovoltaics (PV) technology seem to be much more cautious. To back this initial intuition (gathered from my short experience in business fairs – Intersolar does lack the flashy-kitsch that plague so many other conventions, the tight-silver-clad pair of girls and the roman soldier notwithstanding), I did some quick research in the domain of renewable energy portfolio indexes, to try and figure out how investors were reacting given the recent economic environment. Turns out, it seems I was right: InvestStars (www.investinwhoyouare.com) tracks various portfolios of listed companies according to predefined "profiles", and in turn puts these indexes against the standard S&P 500.
Comparing one-year (June 2009 to June 2010) returns of a solar-based index against a "clean power plants & utilities energy" index (that consists mostly of hydroelectric companies and various "green energy" producers, and which includes plants that use methane emissions left over from coal extraction or biomass burning to produce energy), shows that the former dropped 31 percent of its value while the latter gained almost 22 percent (as a benchmark, the S&P 500 appreciated 17 percent).
This is by any means not implying that investors should pull out of PV technologies. Far from that. But as an outsider the picture I grasp from a quick overview shows that while the promises are huge, the scary parts are even bigger. Quite surprising especially considering the rather "tame" (read, heavily regulated) energy producing environment prevalent in Europe, even in America. Even then, surprises are bound to happen. Example? Spotted at Intersolar: Solarfun Power (ticker: SOLF) of China, unveiled today their new hollow BIPV (a fancy acronym meaning building-integrated solar photovoltaic – read: panels that you can include in your next building design), which offer not only the "oh wow I definitely didn't expect that" latest PV technology (such as high-temperature / high-humidity resistance and high degree of light transmission), but also design patterns which somehow reminded me of wallpaper.
Although, it would be a really, really expensive wallpaper. While my kitsch-radar was receiving a clear, but moderate signal, there is no denying the possibilities offered by such a technology, and I was left wondering if it would gain any ground in rather conservative areas (as far as everyday building design usually goes) such as Germany, which remains a big consumer of home-mounted panels. Nonetheless, Solarfun saw its share beat forecasters' predictions by almost 200 percent (earnings per share got up US$0.35 in the last quarter, while experts believe it would hit US$0.19 – due in parts to boosted exports in light of the decision on June 1 to limit feed-in tariffs in Germany and a weak Euro).
But I've heard through the branches that investors in Chinese PV firms remain quite confident, expecting the government to maintain its heavy subsidies, so that would help explaining part of this impressive return.
Next up: the promised talk on production costs affecting investments, if I don't get sidetracked once again.