I live in Minnesota. The first few months of the year can be tough here. January and February are cold, and there can be stretches when the sun doesn't shine for days. Sort of like the situation the owners of solar stocks are in.
Since the beginning of the year, solar stocks have gone bone-chillingly cold. Even high-flying First Solar
|
Company |
YTD Return |
|---|---|
|
S&P 500 |
(7%) |
|
Suntech Power |
(52%) |
|
Evergreen Solar |
(41%) |
|
SunPower |
(47%) |
|
Akeena Solar |
(23%) |
|
First Solar |
(19%) |
Hope springs eternal
Such bleak stretches can try the patience of even the most long-suffering investors. But as a veteran of both harsh Minnesota winters and the stock market, I know there is still reason to be hopeful: The key for investors is to focus on what lies ahead.
Not easy to do, I know, but I'd like to direct your attention to two recent articles that speak to solar's long-term potential.
In January's Scientific American, "A Solar Grand Plan" proposes a way for the U.S. to generate 69% of its electricity and 35% of its total energy from solar power by 2050. To put perspective on the potential growth this represents, understand that in spite of the sector's incredible expansion these past few years, solar generates far less than 1% of our energy needs.
Accelerating returns?
What's interesting about the Scientific American article is that its authors are conservative in their projections of technological advancement in the sector. They make a point of assuming no further progress in solar technology after the year 2020. (Although, it should be noted that the plan's authors do call for sizeable government subsidies.)
Other solar proponents are not as reticent about the ability of solar companies to continue to deliver technological improvements. In another article, on livescience.com, noted technologist, inventor, and author Ray Kurzweil says the field of solar energy will advance exponentially, in accordance with his "Law of Accelerating Returns."
Under this "law," solar energy will follow a trajectory similar to Moore's Law and will double in efficiency about every two years, while also dropping in price at a comparable rate due to more productive and cost-effective manufacturing methods.
Kurzweil forecasts that solar will meet 100% of our energy needs in 20 years.
The truth lies somewhere in between
It is possible that solar power could fulfill such lofty projections, but, personally, I'm not as confident. For starters, we haven't yet seen anything close to a regular doubling in the efficiency of solar cells.
Nevertheless, even if the solar sector meets only a portion of Kurzweil's projected growth, it would lead to a significant increase over today's production levels. And therein lies the good news for solar investors. In spite of the sector's current malaise, a number of scientific and techno-savvy individuals are very bullish on solar's future.
To be sure, solar investors must still be careful. Innovative private companies such as HelioVolt and Energy Innovations are developing everything from building-integrated solar modules to moveable solar mirrors. This implies that no company's technology -- be it Evergreen Solar's strong-ribbon technology, Suntech's new thin-film production methods, Ascent Solar's
Still, the overall trend is promising. Most of today's existing solar technologies are becoming more efficient and more affordable, and emerging technologies and manufacturing methods promise to keep the sector going strong.
So, even though solar stocks have taken a serious hit, that isn't a sufficient reason to sour on the long-term potential of the sector.
Why, that'd be like giving up on Minnesota just before the arrival of spring -- when the best is yet to come.
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