Solar cells claimed another big name victim when Anglo-Dutch oil giant Royal Dutch Petroleum (NYSE:RD) wrote off $127 million after shutting down two German factories.
Rival oil giant BP (NYSE:BP) exited the thin film solar business in 2002. Both companies, though, appear long-term committed to solar. Should they be? Should you?
Solar is dominated by Japanese giants Sharp -- which today announced plans to expand production into Europe -- and Kyocera (NYSE:KYO). Together, the two account for over 45% of worldwide solar cell sales.
Last year, all manufacturers shipped 530 megawatts (MW) of solar, up 37% from the year before. When you consider the U.S. electric power industry's total installed generating capacity of 981,002 MW, the potential for growth in solar looks outstanding.
The market isn't bigger than it is now because, without government subsidies, costs (in an average sunny climate) range between 22 cents and 44 cents a kilowatt hour (kWh). This will have to fall to 12 cents-14 cents/kWh for solar to really catch fire. But research is promising and prices continue their year-to-year declines.
So, what are the best bets under the sun? On the high-risk end, AstroPower was a profitable solar manufacturer before it fell on hard times and lost its Nasdaq listing.
Sharp would be an excellent choice, but ADR's don't trade in the U.S. Between Kyocera, BP, and Royal Dutch, the two oil companies have shown a willingness to spend on research and to downsize when economics are not favorable. Their low prices-earnings ratios, especially Royal Dutch, and great balance sheets, allow conservative investors exposure to solar.
Kyocera may be the better and more pure play. Solar cells have a lot in common with electronics manufacturing. Just as Eastman Kodak (NYSE:EK) is having trouble switching to digital, the oil giants may find their electronic-based competitors better suited to address this high volume, high capital market.
Are solar cells needed? The University of Utah claims a staggering 98 tons of prehistoric, buried plant material -- that's 196,000 pounds -- is required to produce each gallon of gasoline. With that ratio of input to output, we need options.
And you guessed it! The study goes on, "Fortunately, it is much more efficient to use modern energy sources like wind and solar." But is it as profitable?
W.D. Crotty tracks the solar cell industry closely and owns Eastman Kodak (an inheritance). He can be reached at [email protected] and hopes you will check out this link to industry facts .
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