Big Energy's Big Bets on Solar

Everyone from Wall Street analysts and short-sellers to big oil companies and my next-door neighbor have questioned solar power. And this Fool has written countless (OK, you could probably count them) articles trying to educate Foolish investors on how solar stacks up against traditional energy, how much it really costs and where the industry is headed.

Not enough to convince you? I can see that skeptical look in your eye. How about if I told you some of the biggest players in oil were making some of the biggest bets on the solar industry. It's no longer just venture capitalists looking for a home run or tree huggers who want to save the world who are investing in solar power. It's time to admit the threat to fossil fuels is real.

Big Oil and solar
Some Big Oil companies such as ExxonMobil dismissed solar power a long time ago as an energy source that wouldn't amount to anything. But some major oil producers are starting to put some serious dough behind the future of solar power.

BP (NYSE: BP  ) has been slowly building BP Solar for years but has had a hard time completely jumping in. 2010 was something of a turning point though when the company announced it was increasing capacity at its joint venture manufacturing facility with Tata Power in India and signed a supply agreement with JA Solar (Nasdaq: JASO  ) . BP isn't a big player yet, but the foundation is there.

Total recently gave the solar sector its biggest thumbs-up with a purchase of 60% of SunPower's shares. Combined with a $1 billion credit facility, Total's investment in the solar efficiency leader is $2.4 billion, an endorsement of solar if I've ever seen one.

Not only are Big Oil companies buying into solar, so are some classic traditional energy generators.

Big electricity and solar
Some of the biggest beneficiaries of the buildout of traditional energy generation sources are also making bets on solar.

General Electric (NYSE: GE  ) , which builds and supplies natural gas and nuclear plants, is investing $600 million to expand its solar panel capacity. The 400 MW plant won't get the company close to First Solar's (Nasdaq: FSLR  ) leading thin-film position, but its 12.8% efficiency could challenge the solar giant.

NRG Energy (NYSE: NRG  ) has also made a number of bets on solar, and after it wrote off its nuclear plant in the U.S., this will become a larger portion of the company's future. The company is investing up to $450 million and $800 million of equity in the California Valley Solar Ranch and Agua Caliente solar developments, respectively. When your main business is electricity generation with fossil fuels, that's a big bet on solar.

All of that was a warmup
So BP, Total, GE and NRG don't have you convinced? And $4.25 billion in investments from three of them isn't enough? How about if the country who has the most to gain from oil production put its weight behind solar power? It would be like the United States ignoring our plentiful reserves of natural gas and coal and saying to the rest of the world, "You suckers can buy it; we're building solar."

The country making that statement is Saudi Arabia, which happens to be oil rich and solar rich all at the same time. This week, the country announced it was planning to build 5 GW of solar power and invest "at least $100 billion into clean energy resources." That is a giant investment for a country that already has abundant energy sources within its own borders. But looking into the future, Saudi Arabia wants to be an energy exporter of solar as well as oil.

Oil Minister Ali al-Naimi cited the country's ability to "meet more than four times global demand for electricity" with solar power as a driving factor. If that sounds impossible, check out my analysis of how the U.S. has the potential to provide more than 250% of its electricity needs from the tiny Mojave Desert alone.

Get onboard
If the big money in energy is finally starting to get onboard, it's probably time to give solar a closer look. GT Solar (Nasdaq: SOLR  ) is this Fool's top pick in the sector right now, but manufacturers such as LDK Solar (NYSE: LDK  ) and ReneSola (NYSE: SOL  ) will also reward investors with high growth rates and low valuations.

What company do you think will benefit from solar's emergence over the next five years? Leave your pick in our comments section below.

Fool contributor Travis Hoium owns shares of First Solar, SunPower and LDK Solar as well as being short LDK put options. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Motley Fool newsletter services have recommended buying shares of First Solar and Total A. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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