Too Much PV in 2008?
Trader and Alternative Energy Trading blogger Jerome Ball thinks solar-electric stocks are headed for a fall, and soon.
by: Jerome Ball, a stock trader and author of the Alternative Energy Trading blog
Bullet Arrow January 10, 2008
The following opinion piece is from an independent writer and is not connected with Greentech Media News. The views expressed here are those of the author and are not endorsed by Greentech Media. Jerome Ball intends to trade various PV stocks, primarily with a short bias, over the course of 2008.
As a stock trader, I'm always sensitive to boom and bust cycles in an industry because they provide a fundamental backdrop for a stock. I track these cycles on my blog, Alternative Energy Trading. And I've recently gone from near-term bullish to bearish on PV stocks based on two trends I see emerging through 2010: first, that cells and panels will be in major oversupply by the end of 2008 and, second, that demand is set for a pause due to declining or delayed incentives in Germany, Spain and the United States.
I've compiled a table of year-end capacity through 2010 for more than 90 manufacturers of solar cells (see chart here), indicating my source for each company's number. A solid recent source is the Lehman Bros' Nov. 1 report initiating coverage on the sector. However, that report is already outdated and its cell-capacity data somewhat incomplete to begin with; I've relied on more current data from a wider set of sources including company earnings reports, presentations, Web sites or other press articles.
Supply and Demand
Bottom line: By the end of this year, cell producers will have an installed capacity of 12.4 gigawatts of annual production, according to present manufacturer plans. When you add in solar-thermal capacity (such as from Ausra, etc.) that number grows to 13.1 gigawatts or more. Looking ahead, the 2009 end-year production capacity is simply enormous, at over 17 gigawatts. Is this a problem? Oh, yes, when you look at the demand estimates. Match the year-end 2008 capacity of 12.4 gigawatts with 2009 demand: The European Photovoltaic Industry Association's optimistic ("policy-driven") estimate of 2009 world-wide demand is 4.3 gigawatts. Lehman calls it 4.8 gigawatts. Merrill Lynch has 5.2 gigawatts. A Q-Cells' presentation referred to a UBS number of 8 gigawatts. Even if you de-rate the 12.4-gigawatt number to account for "actual" vs. "nameplate" capacity; even if you attempt to adjust for "press-release" vs. "actually built" capacity, the numbers are still very out of balance. Even the most optimistic 2009 demand guesses fall far short of what the industry intends to produce.
The PV industry is heading for 50 to 100 percent capacity oversupply, at least.
Full article continues at: Solar Photovoltaic Oversupply Predicted
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Alternative energy stocks and other renewable power investments are a core component of ethical investing portfolios. Find info on Alternative Energy websites, research solar power, locate renewable power information and solar energy companies online. Links to info on clean fuels, solar power as a peace technology, solar energy stocks and clean power mutual funds.
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WARNING: Investing in common equity of public companies is a high risk, high potential reward activity. Owning investments in individual alternative energy companies is for high risk investors only, and medium risk investors should consider green mutual funds, clean energy funds, renewable power index funds and other sector plays. Even then, these should be owned as part of a widely diversified portfolio. There is a gathering mania for investing in publicly-traded alternative energy companies, similar to the computer, technology, internet and banking / real estate booms of the past two decades. There will be some nasty corrections along the way, and some years from now when they come crashing down en masse, the world will still benefit from all the amazingly advanced clean and efficient energy technology created during the bull run. (Above note re-written March 2009 as my earlier prediction of a market top and a crash in the sector starting in August '09 was hastened by the credit markets collapse and began in August 2008, before the bubble had fully formed. Of all the sectors in the equity markets, clean energy has the best prospects to assume market leadership and public favour; we are bouncing aong the bottom still, and those who have followed our guidance to begin including (in a judiciously blended portfolio of cash, bonds, stocks and yes, um... real estate) green energy investment funds dollar-cost-averaging programs in Winter and Spring of 2009 are well positioned for longterm capital growth.)
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