Does this make solar a great industry to invest in because of the growth potential, or a terrible industry to invest in because the prices are racing to the bottom?
There are going to be some huge companies thanks to solar. Those companies are also going to have big valuations, at least until the market is much more mature and saturated, but we're decades away from that.
As Ramez said, you don't bet on an "emerging industry", you bet on the winners in that emerging industry, otherwise you may very well lose your money. When new industries are born there are usually hundreds of competitors in the beginning, but eventually only a few big ones remain, and it's usually those that started early and got big early.
Just popping in here with the customary reminder that even if the sector is growing rapidly, that does not make any individual company in that sector automatically a good investment. Just look at the giant graveyard of solar panel companies that went bankrupt.
I'm not convinced, solar is only now becoming cost competitive, that means for most of this period it was more expensive than its competitors. Now its getting into the realms of being the cheapest option, so why would growth be harder to come by?
It is a great investment and people are installing crazy amounts of it around the world.
However on an individual scale, market externalities mean that individual choices often lead to inefficient outcomes because the true cost is not borne by the person making the choice.
This is almost certainly the case when you decide that solar doesn't make sense for you economically.
The race to the bottom is more applicable to the panel manufacturers. The lowest cost producers are mostly Chinese companies, and the financial performance for these companies (ReneSola, Yingli Green Energy, Trina Solar, etc.) has been pretty terrible so far. Probably the best way to invest in solar through the stock market is to invest in a developer of solar projects. The best of these in my opinion in terms of scale and expertise is SunEdison (ticker: SUNE), and incidentally, the stock has been in free fall for various reasons over the past couple weeks, so this is probably a reasonable entry point.
I came here to post this. The solar "gold rush" of 2006-08 was precipitated by companies like HelioVolt claiming they could achieve panel production for under $1/watt.
Cheaper solar panels won't kill the industry, it will make it economically viable on the large scale. If this article's predictions are correct, it's probably time to invest--if you know the right company, that is.
The solar industry did explode with jobs ten years ago, and has kept growing since.
The thing that didn’t work out were some high profile panel manufacturing plays, but the solar industry as a whole has grown and employs more people than the oil and gas industry.
In fact, the “China price” is responsible for a lot of that growth, because it’s made the economics of solar irresistible in many places.
Regulation isn’t a good moat. Solar panels are a commodity- it’s a race to the bottom. Solar looks like (and has been) the storybook case of a positive trend that makes for a poor investment.
I think that many of the most visible parts of the solar value chain (the panels and the installers) are very competitive industries that are going to be poor investments. However, there's always some segment of the value chain that is condensed into a few technologically-advanced and capital-intensive companies. I think we'll see this with solar as well, and there will be trillion-dollar companies that come out of it.
While I do agree that it is a bad time to invest in electricity generation business in general, an electricity consumer would invest in solar today because he has some saved money today, and it's the best ROI around. (Or wouldn't, if it isn't.) The price it may have tomorrow does not change the overall picture.
Even if it's negative it pumps money into the designer solar panel sector which will bring in further investment and research and scale to bring prices down.
The solar panel manufacturing industry is fine. Healthy year on year growth at a rather spectacular rate with absolutely no sign of that changing any time soon (the opposite rather). Demand world wide is strong; and growing. Both for grid solar and roof top solar. Hundreds of gigawatts added every year and that's trending towards terawatts.
The bit of the industry that is at risk collapsing is the VC funded companies that "help" their customers get solar roofs by talking them into dodgy loans or leases they can't afford. If people can't pay off their loans or cancel their lease, these companies end up with a lot of solar panels that are stuck on roofs not generating any monthly recurring revenue. Removing them means spending more money and the second hand value is probably not amazing.
Add a lot of dodgy sales practices to the mix and the same kind of sleazy practices that banks used to talk people into mortgages they couldn't afford before the housing bubble burst in 2008 and you have a nice recipe for a company sitting on a lot of debt that is at a high risk of defaulting and not bringing in the revenue that they thought they were going to get. They'll create a big mess by twisting lots of arms to get some of their money back and bankrupting some families in the process and they'll get bogged down in expensive court cases for years to come. So, what's collapsing is the notion that these companies that took billions in investment to fund all this are going to turn into nice little rainbow pooping unicorns.
This kind of economical Darwinism is fine. Bad businesses not making it and taking some investors with them is not going to be the end of the world. But it's not going to slow down solar panel production and deployment. The US has plenty of underused roof real estate, and most of it us at a great latitude for getting some decent energy out of solar. With US grid infrastructure being as bad and expensive as it is, there are going to be plenty of people looking at getting some panels on their roofs. Just like every else in the world.
I can also argue increased demand for solar panels increases manufacturing and lowers prices over time making solar more competitive. It's not clear that it's a net negative.
This has been the effect we saw when Germany started investing so heavily into solar.
You could say the same thing about almost any mature technology though. Meanwhile there are incredible amounts of money being made in solar. A friend has a solar installation business, he's been hiring more people year after year and is doing very well for himself and his co-founders.
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