We noted the other day the sizable purchase made by a Warren Buffett-related company in two solar power plants being built by SunPower. Good deal all around. But then we saw the news that lots and lots of folks proceeded to invest in solar module makers - as if that was what Buffett had done. (He hadn’t.) Was that smart? Some would certainly say, No! To which we respond, with solar as with anything else, investigate before you invest.
My dear sister has tried to get me hooked on Downton Abbey and as I watched the first episode of Season Three the other night, it seems that the Patriarch of the clan has managed to lose most of the family’s money by investing everything in one company that is now going bankrupt. Which brings me back to this cautionary tale about investing in solar module makers, such as Trina Solar. In a really scary story about what might not always be obvious to the casual investor (the “momentum investor” in the language of this piece), Richard Pearson over at Seeking Alpha writes about Trina Solar: As Debts Come Due, $14 Billion in Off-Balance Sheet Liabilities.
Seems that Trina is locked into some long-term supply agreements for polysilicon (the primary raw material for its solar modules) which are resulting in the company having negative margins on its products. In other words, they are losing money on every solar panel that they sell. Talk about not sustainable. Yet Trina’s stock price rose on news of the “Buffett” purchase and continues to rise. Have those investors seen this information?
There are lots and lots of reasons to be strong on solar as a technology, as a job creator, and as the way of the future. But if you are going to invest in solar companies - any solar company - you would be wise to make sure you really know what is going on. Or you might just lose your abbey.
(Disclosure: I have no position whatsoever in any solar company - other than Run on Sun!)
Since cost-benefit analyses appear to be the rage in the New Year, particularly regarding solar, we were struck by a piece over at Greener Ideal documenting three key ways in which the solar industry boosts the overall economy - here’s hoping these are being factored into those analyses!
The most significant way is that solar power means jobs - actually more jobs in the U.S. than does the coal industry! Indeed, the U.S. solar industry employs 119,000 people compared to just 86,000 working for coal companies. Moreover, job growth in the solar industry far outpaces that in the coal industry. In 2012, solar jobs increased by 13% while the overall U.S. economy was growing by just 2.3% and the fossil fuel industry lost jobs overall.
Of course, most coal-related jobs are with large corporations whereas many solar jobs are found in small businesses, like Run on Sun, which might explain the disproportionate impact that the coal lobby has over the solar industry trade groups like SEIA.
But seriously, if you were advising your child about where to look for work in the 21st Century, would you want to send them toward a coal mine or a solar farm? While the solar industry is not without its risks, cave-ins and Black Lung are not among them.
All fossil fuel is finite; we aren’t making anymore during our lifetimes or those of our offspring. By contrast, energy from the sun will be around as long as humans inhabit this Earth - it is clean, abundant, and free. Every solar-powered kilowatt-hour that we generate means that much less coal to be mined, natural gas to be “fracked” or barrel of oil to be imported from unfriendly regions of the world. A stable supply of renewable energy frees our country from a host of problems both natural and man-made.
Last, but by no means least, solar saves people money. Serious money, in fact. For commercial building owners, that savings can translate into the ability to hire more workers. For residential clients, the savings are more money to spend in the local economy, boosting employment in your home town.
Put it all together and it is easy to see that solar power is a boon to the economy - and we haven’t even touched on its environmental benefits! (Did someone say, “Climate Change"?)
Just three reasons why 2013 is the Year to Go Solar!
A company controlled by Warren Buffett’s Berkshire Hathaway - MidAmerican Energy Holdings - has announced that it will pay SunPower between $2.0 and $2.5 billion for the 579 MW Antelope Valley solar projects.
Shares of publicly-traded SunPower (SPWR) jumped on the news and closed the week at $8.73, up 2.6 times over its 52-week low.
MidAmerican had previously purchased a 49% stake in a 290 MW solar project in Arizona and the FirstSolar Topaz Solar Farm (590 MW) in California. The Antelope Valley project will sell power to SCE under two long-term contracts.
The announcement was certainly good news for SunPower which, like other manufacturers of solar power modules, has struggled in the last year as modules prices have continued to fall.
Of course, falling module prices - while extremely painful for module makers - is good news for installers and their clients. That said, we do not anticipate significant drops in system prices during 2013 and with rebates continuing to decline, waiting to buy is not likely to be a rewarding strategy.
Or at least so Mr. Buffett seems to think.
We wrote before about an upcoming study from the California Public Utilities Commission (CPUC) to determine the overall cost-benefit of installing solar. Well in advance of that study, the investor-owned utilities (IOUs) in California are coming out swinging, with populist rhetoric about solar’s unfair impact. But just because a utility says something, doesn’t make it true! Here’s a quick take.
In the closing weeks of 2012 several news stories appeared, making the case for the IOU’s POV regarding solar. (This one from the San Francisco Chronicle is typical: Solar Power Adds to Nonusers’ Costs.)
Their theory is that because solar system owners pay according to Net Metering - whereby excess energy produced during the day is used to offset (or net out) energy usage at night or during stormy days - they are not paying their fare share of other fixed costs of the utility such as for distribution and transmission facilities.
It is certainly true that solar customers pay less for distribution and transmission systems because those costs are tied to a customer’s total usage and is not simply part of the fixed “customer charge” that all residential utility customers pay - including solar customers. But customers did not decide the nature of the utility’s rate structure, and presumably the IOUs were happy to charge more to cover “fixed costs” based on usage. If that is the case, then it is equally fair to receive less from a customer with a lower monthly usage.
Moreover, the “analysis” being advanced by the IOUs ignores the benefit of that net energy being provided by solar customers - since that energy largely peaks alongside the utility’s peak demand, it offsets peak production energy costs for the utility. Such “peaker” plants provide the most expensive energy a utility produces, so reducing that demand is actually a significant benefit to the utility.
At least one countervailing analysis asserts that solar customers are providing a net benefit: Solar Power Generation in the US: Too expensive, or a bargain? That study looked at all components of solar system benefits - including impacts on transmission and distribution - and concluded that solar power customers are actually subsidizing other users, even with solar deployment as high as 30% (the current net metering cap is just 5% and California is still a long way from reaching that goal).
Make no mistake, the IOUs are coming after net metering because it is beginning to affect their bottom line - and they can predict that as costs for solar continue to fall, that enormous potential for solar energy will hurt their business model. The solar industry is in for a fight - and it will be a fight of existential proportions.
Though not strictly speaking a solar news story, we are pleased to note that the “fiscal cliff” deal agreed to last night by the House includes provisions from the Senate that will preserve federal tax credits for wind power systems. You can read more about it over at Renewable Energy World, “Wind Energy Tax Credit Extension Passes with Fiscal Cliff Deal.“
Of course, the extension is relatively short term and it begs the question of what will happen with the solar ITC which is presently scheduled to expire at the end of 2016. Still, anytime support for renewable energy - be it wind or solar - passes Congress, it is grounds for rejoicing. Here’s hoping that this is only the first of many legislative victories in 2013.