You've probably heard about the total solar eclipse that's coming this Monday. Solar-energy producers have also heard about it and are planning for the loss of power generation that's set to come along with it. In this week's episode of Industry Focus: Energy, Motley Fool analysts Sean O'Reilly and Taylor Muckerman explain how this eclipse will affect the solar industry this Monday.
Also, the hosts look at new reports from the Energy Information Administration of further decline in crude oil supplies, Tesla's (TSLA +3.44%) move to take microhouses on the road in Australia, a new proposed tariff that'll hit solar-cell manufacturers hard and cause a loss of up to 80,000 solar industry jobs, and more.
A full transcript follows the video.
This video was recorded on Aug. 17, 2017.
Sean O'Reilly: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. Today is Thursday, Aug. 17, 2017, so we're talking about energy and industrials. Today, we're talking about the solar sector in the light of the fact that panels across the U.S. are about to briefly lose something that's super-important -- the sun. But first, how's it going, Taylor?
Taylor Muckerman: It's going pretty well. Solar-eclipse episode.
O'Reilly: Do you got your spots staked out? Do you have your special glasses?
Muckerman: No glasses. I'm just going to stare right into the sun. Or the lack thereof.
O'Reilly: Sounds like afterwards you'll need some glasses.
Muckerman: We'll see. I might just take my contacts out so they don't melt in my corneas.
O'Reilly: Also good. They'd magnify like an ant or something.
Muckerman: Maybe contacts plus solar eclipse equals perfect vision. Who knows?
O'Reilly: Maybe.
Muckerman: Yeah, I'll be in the Outer Banks.
O'Reilly: That's actually really cool.
Muckerman: I should have a decent view.
O'Reilly: That's actually really cool.
Muckerman: I wish it was last week, because the Perseid meteor shower rolled through, and you can't see that here in D.C. Too much light pollution.
O'Reilly: Before we talk about solar, we have to talk about the other energy source that everybody knows and loves: oil. We have to rap about this, because it's very odd. Oil still struggling, can't quite break through $50 a barrel, yet the EIA reported a decline recently, a seventh week in a row of crude oil supplies here in the U.S. in inventory. For the week ended Aug. 11, 8.9 million barrels, there was a forecast for a decline of 3.6. Does this modify your thoughts on the situation at all?
Muckerman: Not really.
O'Reilly: Seven weeks of... I know it's summer driving season.
Muckerman: It's still at the high end of its multi-year range. It's not like we've never seen this before. It's still elevated. It's not as drastic as it was, maybe, seven weeks ago. But we're not at a level where people are scrambling for oil.
O'Reilly: Yeah, it's a curious thing, because it comes out, and the oil rallies a little bit, and it's still hanging out. I think it's just the threat of the shale stuff.
Muckerman: You look at that, but then you look at all the potential wells that, all they need to do is push a button and frack them, and then oil starts pumping, that's hundreds of thousands of barrels of oil per day just waiting to be fracked. So inventories could turn --
O'Reilly: What's that, 4,000, something like that, tapped wells?
Muckerman: I don't have the exact number in front of me, but I do remember seeing the last week. It was 73% higher than at this point last year, in terms of wells that are drilled but not depleted. It's the most expensive stage, but if oil prices rise to $55-$60 a barrel, you're likely to see some buttons being pushed and some fracking explosions under way.
O'Reilly: For sure. So what's this I hear about a tiny Tesla house going on tour in Australia? [laughs]
Muckerman: Yeah, it's kind of cool.
O'Reilly: I think it should be featured on TLC or something. [laughs]
Muckerman: I feel like I've seen a show, Micro Houses, or something like that.
O'Reilly: Yeah, that's what I'm talking about.
Muckerman: I've often thought about trying to buy a plot of land and putting 10 of these on it in D.C. and renting it out.
O'Reilly: That's a business, yeah.
Muckerman: It is, but the zoning in D.C. isn't very friendly. Right now, I think the only way you can have one of these little minihouses is if you put it on your own property, like in a backyard.
O'Reilly: Like a guesthouse or something?
Muckerman: Yeah, that kind of deal, because it's something about attaching it to the public water sources. They had a little community of them here at one point in D.C. -- there were five to 10 houses as a test site, and I think they had to move. But they're easy to move, because a Tesla Model X can pull them, which is what's happening here.
O'Reilly: Which is what's happening here. Because they're advertising the value of having solar panels on your roof --
Muckerman: Yeah, and the Powerwall, the battery storage that they're building.
O'Reilly: So the tiny house runs on three.
Muckerman: It has six solar panels. I think it's 2 kilowatts of solar energy. Everything about it is totally generated by those solar panels, and it has one Tesla Powerwall on the outside of it. They did this for Tesla, the car, a while back when they towed an Airstream around and people could go inside and they had computers where people could build their own Tesla. Here, you can go inside this house and build your own solar installation for your home. So they're testing it out. If it works, they could probably drive a few more of these around Australia, maybe the United States. But advertising for the Model X, I guess, and for their solar roofs. The solar roofs are definitely taking off. They made their first installations in Q2. They were on some employee's roofs.
O'Reilly: Elon Musk, obviously.
Muckerman: Well, I'm sure he has it, too. But, yeah, the solar roof, first installations in this most recent quarter. It's pretty darn interesting. They say it's more affordable, because it pays for itself over the long run. It's stronger and lighter than most normal roof tiles.
O'Reilly: Even Buffett's right-hand man, Charlie Munger, I remember, he just asked about the future of energy and all this stuff or whatever. And this is like, I don't think I'm going out of bounds here in saying that 10, 15 years ago, he was like, "We need to use the sun a lot."
Muckerman: Yeah, and this could be the way. This is an entire roof covered in little solar panels. It's tempered glass, three times stronger than standard roof tiles, and less weight.
O'Reilly: You know what's the funniest part about Musk's roof solar thing is? He always talks about how beautiful they can be. He always talks about how attractive they can be.
Muckerman: I mean, you don't want an ugly roof.
O'Reilly: I know. It's just funny to me.
Muckerman: You have a single-story house, or a multi-story house with super-slanted roofs, you don't want your neighbors rolling around like, "Gosh darn it, this guy again with his ugly solar roof." Because this isn't going to be panels that are a second layer on your roof. This is your actual roof. It's not like they're building something on top of your house. It's as streamlined as tar and tile.
O'Reilly: It's amazing.
Muckerman: The pictures I'm seeing, it kind of has a little blue tint to it, which is kind of unique.
O'Reilly: Moving onto the big event of the weekend.
Muckerman: Well, Monday, the 21st.
O'Reilly: I saw everyone was commuting this weekend. Including you, apparently.
Muckerman: I mean, I'm not going there for this. I'm only going for a couple of days, Saturday through Tuesday. Annual reunion of friends.
O'Reilly: There you go. I hope you have a good time.
Muckerman: I hope so, too.
O'Reilly: But, total solar eclipse coming across North America.
Muckerman: Yeah, from Oregon to South Carolina is the direct route.
O'Reilly: I initially thought, because there was a total solar eclipse when I was in grade school or something, you made the box thing, you know.
Muckerman: Yeah, I was there for that.
O'Reilly: I obviously don't have a huge recollection, but I remember being underwhelmed.
Muckerman: Well, yeah, it's like three minutes.
O'Reilly: I could still see. I was a kid and I was imagining complete darkness.
Muckerman: Yeah, it's not as cool as you might think. In a sense.
O'Reilly: I mean, it is cool, bottom line. Because of that, I was like, solar waves will be fine, there's still light coming, they'll be fine. It turns out there's a decent amount of energy that's going to be missed out on.
Muckerman: Yeah, you get ambient light. You're not going to get the direct power of the sun, which is what solar panels need. So there's around 1,900 utility-scale solar installations in the U.S.
O'Reilly: Which is way more than most people would think.
Muckerman: Yeah, that number caught me off guard when I first read it a while back. A lot of those are going to be impacted to varying degrees. If you're in the direct line, you could have 100% totality of loss of power at these plants. The majority of those 1,900 don't fall in that 100% totality range. You have a lot in Southern California that will probably be in the 60%-80% totality, and some in North Carolina and Georgia and South Carolina that are in the 90% range.
O'Reilly: Have you seen many estimates as to how long we're talking here?
Muckerman: I saw one for California, which is the largest solar power-producing state in the union, produces about 40% of solar power in the U.S. And they say they're expecting to lose 50% of their power generation from solar from about 9 a.m. to 12 p.m.
O'Reilly: So three hours. This seems like a four-hour thing.
Muckerman: Yeah. So they're going to be relying heavily on hydropower, natural gas, maybe if nuclear can kick in a little more. But the base load is really going to be tested after being able to rely on --
O'Reilly: This is why you have a Powerwall. [laughs]
Muckerman: This why you have a Tesla Powerwall, exactly. If you're in Australia and you happen to see that car rolling around coming go ahead and order one, or just log online and do it.
O'Reilly: I remember, and obviously, it worked, I think, but I remember when Musk introduced the Powerwall. He had the big thing in a warehouse and all that stuff, and they had them all hidden. And he was like, "Look, they're powering this room." And he had a bunch of them, and they were powering the whole building.
Muckerman: They're pretty sweet. They are very streamlined. They're not as big as you would think, to power your entire home. They're only a few feet tall and less than a foot thick, maybe a foot thick.
O'Reilly: There's just a bunch of lithium in there, basically.
Muckerman: Exactly. That's what they say. So you can either use that to power your house, or if you're like Australia, you can use 100 megawatts or 129 megawatt hours from the battery power pack system that they won the auction for.
O'Reilly: I want to use my SolarCity Tesla roof to power up my Powerwall to charge up my SpaceX rocket and go to Mars in it. [laughs]
Muckerman: On day. And you can land that rocket back on your driveway.
O'Reilly: Yes. And my Tesla car somehow turns into the rocket.
Muckerman: I actually rode in a Model X a few weeks ago in Dallas. It was an Uber that picked us up and drove us to the airport.
O'Reilly: No way. Was it a driverless one?
Muckerman: He did do some driverless stuff on the highway.
O'Reilly: You're lying! On the freeway?
Muckerman: On the freeway, yeah.
O'Reilly: Sweet. What's it like? Was he just playing a game? What happened?
Muckerman: I mean, he kept his hands near the steering wheel, but they were completely off for several miles.
O'Reilly: That's fun. I'll never forget, fool.com writer Dan Sparks, he lives in Colorado, and he owns a Tesla. He wrote an article about, I think, he let his car go 90 miles?
Muckerman: I mean, we obviously saw it was possible. One thing I will criticize is, the backs of the seats are this plasticky material.
O'Reilly: In the Tesla? Oh, for the Uber. He did it to protect his car.
Muckerman: No, it was actually part of the car. And they were all scratched up.
O'Reilly: Interesting.
Muckerman: Yeah. I don't know if that was a base model.
O'Reilly: Elon Musk, I don't know if you're listening ...
Muckerman: Yeah, step your back-of-the-seat game up.
O'Reilly: Geez, man.
Muckerman: Geez, man. Well, I was in the third row, because we had a packed house. I had to climb out of those gull-wing doors.
O'Reilly: You said it was an X?
Muckerman: Yeah, the SUV.
O'Reilly: What did you think of the doors? Did you like them?
Muckerman: They pretty cool. They were tricked out.
O'Reilly: What do you mean, "tricked out"? Was gold painted on them?
Muckerman: Like a Pimp My Ride kind of deal.
O'Reilly: The doors were pimped out?
Muckerman: It's a pimped-out feature, tricked-out feature.
O'Reilly: Ooh. I was like, "They decorated the falcon-wing doors?" [laughs]
Muckerman: No, just the fact that you have gull-wing doors that can adjust to the width of the parking space, if you have two cars on either side of you.
O'Reilly: It's kind of cool.
Muckerman: It's pretty tricked out.
O'Reilly: It's pretty cool. There was only one or two reactions when that got announced, and it was sheer confusion --
Muckerman: Flair for the dramatic.
O'Reilly: Yeah. Before we head out here, did you hear about this ITC Trade Commission that got a request from some solar-panel manufacturers to place tariffs on imported solar cells?
Muckerman: They're actually the solar-cell manufacturers, not the panel manufacturers.
O'Reilly: Oh, sorry.
Muckerman: No, problem, I read that wrong myself the first time. But yeah, one of them is no longer a cell manufacturer, because they went bankrupt. That would be Suniva. Then, you have one other company coming out trying to get some tariffs or some floor prices set on solar-cell imports, because they say China is just flooding the market in other Southeast Asian countries.
O'Reilly: So I'm very interested to know, I didn't see it in any of our reading, very interested to see what First Solar and SunPower have to say about this.
Muckerman: Well, Goldman Sachs said that SunPower is one of the companies that could be hurt if they have a cell tariff.
O'Reilly: That's what I want to get at. They're like, "There's just no way we can compete with these Chinese manufacturers. We're not even going to try."
Muckerman: And 60% of our cells come from China, Taiwan.
O'Reilly: That's just it. America is an advanced manufacturing country. We make Boeing airplanes and stuff. So what they're doing is taking the cells that are low-cost that you can't possibly make and combining them into advanced modules. So they're importing them from China, and they're putting them together in something more advanced. And that seems to be working out for everybody. And this would be bad for them.
Muckerman: Yeah, you've got efficiencies going up. Prices are coming down. So, they say, the Solar Energy Industries of America, kind of the spokesperson of the solar industry here in the United States, they basically said that could kill up to 80,000 jobs if this goes through in the solar industry.
O'Reilly: It begs the question, because obviously, we've become a little bit more nationalistic, protectionist in the last year or so. But since World War II, we've been as free market as we possibly could. I'm very curious what will happen here. The argument against it, of course, is that if you coddle American manufacturers, they'll make crappier cells.
Muckerman: The funny thing is, I read that these two companies, one of them is 60% owned by a Chinese company, and the other one is a German company, they're just based here.
O'Reilly: This sounds ridiculous. [laughs]
Muckerman: Yeah. So they're arguing for tariffs of imported cells to the United States, and they're foreign companies, majorly, themselves. So kind of an interesting little tangent there. But the ruling from the FTC comes out a month from the solar eclipse, Sept. 22. So we'll see how that goes. There's a few distractions right now on Capitol Hill.
O'Reilly: A few.
Muckerman: [laughs] So we'll see if this garners any attention. But you've got the majority of the industry here in the United States saying that it's a non-starter, and if these tariffs or floors are instituted, some jobs will be lost and some companies could be hurt. Goldman Sachs lumped Sunrun and Vivint Solar in there as well with SunPower. So I think it would be a little bit shocking to see these two companies, one of which is bankrupt, win and have a tariff levied against these cells to impact one of the fastest-growing energy industries in the country.
O'Reilly: Very good. Thank you for your thoughts! That's it for us, folks. Be sure to tune in tomorrow for the Technology show with Dylan Lewis. If you're a loyal listener and have questions or comments, we would love to hear from you. Just email us at [email protected]. As always, people on this program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against those stocks, so don't buy or sell anything based solely on what you hear on this program. For Taylor Muckerman, I'm Sean O'Reilly. Thanks for listening, and Fool on!
