October 14, 2010 - The Solar Boom in California
Featured Trades: (CALIFORNIA'S SOLAR ENERGY BOOM),
(FSLR), (SIRE), (HOKU), (TSL)
1) The Solar Boom in California. There is a gold rush of a different kind going on in California, the solar variety. There is a stampede by 49 alternative energy projects, including nine solar ones, to get final approval from the California Energy Commission before massive federal incentives offered by Obama's 2009 stimulus package expire at the end of the year.
One massive 392 MW plant, the Ivanpah project by BrightSource Energy (click here for their site) near blasting hot Blythe, California promises to deliver nearly as much solar power as the entire 481 MW in generation installed in the US in all of 2009.? That is enough to provide electricity for 300,000 homes. It will involve harnessing an impressive 173,500 heliostats spread over one square mile of virgin desert to superheat water to produce steam in a closed cycle. Expect this company to be a red hot IPO some day.
The combined projects involve $30 billion in investment that will generate 15,000 jobs, an understandably sensitive issue in this election year. Many are located in the state's huge baking deserts, where temperatures frequently exceed 120 degrees, and you can literally fry an egg on the sidewalk. The economy there has long been structurally depressed, and employment opportunities have been few.
The golden state has set a goal of obtaining 33% of its electric power from alternative sources, up from the current 11%, by 2020, the most ambitious anywhere in the world. The driver has been state law AB32, which is expected to generate a staggering $104 billion in energy investment over the next decade. Only China can match these numbers for sheer scale. It is hoped that these plans will hold global carbon dioxide levels stabilize at 450 ppm by 2050. Oil industry attempts to water down the law in the November election are expected to fail.
The intention is not only to wean ourselves off of expensive polluting foreign oil, but also to make the state a hot house for developing new energy technologies that can be exported to the rest of the world. Possibly half of the venture capital presentations I have attended this year promised to deliver new carbon free sources of energy.
I have been pushing solar for a long time as a national security issue. If you add in the cost of maintaining our military in the Middle East, the true cost of imported oil is not $82 a barrel, but $112. Solar is also a great investment opportunity, since I believe that rising oil prices will drag the breakeven points of these companies to unimaginable heights (click here for 'Solar Energy is About to Achieve Cost Parity').
As with all emerging technologies, there is always a dearth of investable securities at the beginning. Microcaps like Spire (SPIRE) and Hoku (HOKU) have enjoyed huge spikes in recent days. Better take another look at more stable and established first solar (FSLR), which offers cutting edge thin film technology. You also might tale a peak at Trina Solar (TSL).
