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August 13, 2019

Global Market Comments
August 13, 2019
Fiat Lux

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August 14, 2018

Global Market Comments
August 14, 2018
Fiat Lux

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June 6, 2018

Global Market Comments
June 6, 2018
Fiat Lux


SPECIAL SOLAR ISSUE

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(HOW TO BUY A SOLAR SYSTEM),
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The Ten Baggers in Solar Energy

What we are seeing now is nothing less than the complete remaking of the American energy supply.

It is a metamorphosis, just as, if not more, dramatic than the initial electrification of the United States launched by Thomas Edison in 1876.

Think of it as a disruptive technology with a turbocharger.

Eventually, the cost of energy will drop to near zero in today?s terms, possibly as soon as 2035. The consequences for your trading and investment portfolio will be tectonic.

This is what people don?t get about solar.

Traditional forms of energy production and consumption, such as for oil, coal, natural gas, and hydroelectric, are subject to only linear improvements. Solar ones benefit from exponential growth.

There is, in effect, a solar Moore?s Law that sees efficiencies per dollar spent doubling every four years, such as we have already seen with the faster growth of microprocessor efficiencies since the 1960?s. Exponential growth of efficiencies will bring exponential growth of profits.

I am old enough to have lived through several solar booms in the past, only to see them crash and burn.

In 1979, President Jimmy Carter installed panels on the White House roof to provide leadership during the Iran oil crisis, only to see them torn down by President Ronald Reagan three years later.

Solar is now growing far faster than any other power source in the US, some 50% a year for the past six years.

Annual installations of photovoltaic panels have soared from a token 0.3 gigawatts in 2000 to an impressive 7.286 gigawatts in 2015, more than enough to fuel 8.5 million American homes.

California alone now has 500,000 homes running on solar, about 4% of the total. Installation trucks from a myriad of different local companies are seen everywhere.

This is all happening because of the simultaneous maturing and cross-pollination of technology, regulation, financing, and venture capital.

A key development was Chinese entry into mass production of solar panels, which led to a near immediate 80% collapse in prices. They now control 70% of the global market.

But this also led to the bankruptcy of a large number of US producers, including the ill-fated Solyndra, which I drive by every time I visit Tesla.

Chinese exports of panels to the US are now subject to anti dumping duties. This was all a windfall for the installation business.

Also helping has been the 90% collapse in the price of polysilicon, a key manufacturing component. Silicone (Si) is, in fact, one of the most common elements on the planet.

Still, the soft costs of sales, design, permitting, and labor, account for two thirds of a new installation today. By the way, solar has also proven a prolific new job creator. I can assure you, the cost of labor is never going to zero.

Some 15 years ago, I tried to install solar on my home and sell peak power to the grid. PG&E told me this was ?illegal? because I would crash the grid, something I knew was patently false.

This time around, my city permits sailed through effortlessly, and I received a polite email from PG&E instructing me how to read my new ?net metering bill?. I wish renewing my driver?s license was so easy (that damn vision test).

For the first time in history, solar power is now cheaper than grid power on a non-subsidized basis. Costs are set to still fall dramatically from here. Fossil fuels are about to become, well, fossils.

The Paris based International Energy Agency, no slouch when it comes to analyzing power data, predicts that solar will account for 27% of the global power supply by 2050, and will become the biggest single source.

But futurologist friends of mine, like Tesla?s (TSLA) Elon Musk, Google?s head of engineering, Ray Kurzweil, and cosmologist Dr. Stephen Hawking, believe there is no reason why it shouldn?t be at 100% by 2030-35. To quote Kurzweil, ?we are only six more doublings away.?

Google (GOOG), by the way, is already one of the world?s largest generators and distributors of solar power, while Musk is the preeminent installer through his participation in Solar City (SCTY).

Governments have been pouring fuel on the solar fire. Germany took an early lead, installing a massive 35 gigawatts over the past decade. It has since decided to shutter its entire nuclear industry, and offset its production with alternatives. But many of its subsidy programs were deep sixed by the crash.

President Obama made a 30% investment tax credit a central plank of his 2009 supplementary budget, which led to the current American solar renaissance.

That incentive expires in 2021, after getting a five year extension in a rare bipartisan deal in congress.

President Obama also upped the ante by using the Environmental Protection Agency to force power utilities to cut carbon emissions by 32% from 2005 levels. That involves setting a target of 28% alternative energy power generation by 2030.

The whole idea of using natural gas as a low carbon stepping stone has been abandoned.

Hillary Clinton has recently weighed in with her own plans to shift the country from a carbon to a solar energy based economy, if elected president.

She wants nothing less than to eliminate all oil and gas subsidies worth $100?s of billions, and shift the money to alternatives.

That is a radical move. Her goal is to increase the solar share of American power generation to 33% by 2027.

Individual states have weighed in with their own measures. California has mandated that its residents obtain 30% of their power from alternatives by 2020.

More than two dozen other states have followed with similar measures, including several red ones. Solar is starting to transcend the political spectrum; the numbers are so compelling.

This isn?t just a US phenomenon, but a global one. Saudi Arabia has two of the world?s largest solar plants on the drawing board, to produce some 2 megawatts.

After all, why burn $5 oil when you can sell it to foreigners (mostly the Chinese) at an extravagant $50 a barrel. They are also major investors in the San Francisco alternative energy scene.

China is building far and away the biggest solar infrastructure, and wants to build 70 gigawatts over the next two years.

Japan has a 20% solar target, thanks to the Fukushima nuclear disaster. India plans to provide cheap electricity via solar to 100,000 villages for the first time.

Improving solar cell efficiencies promises to take us further and faster into this brave new world.

My own SunPower (SPWR) X-335 panels, with their patented Maxeon solar cells, convert 20.3% of the sunlight they receive into electricity, the highest in the industry. Cheap imported Chinese panels offer efficiencies as low as 16% and don’t last nearly as long.

University labs have perfected cells with 45% efficiencies using advanced silicon compounds. I happen to know that the military has a 65% efficient cell. All that remains are the economies of mass production to bring them to the public market.

This is crucial for the solarization of the global economy. Every 1% improvement in efficiencies cuts that total cost of a new installed system by 5%.

With the trends already in place, it is safe to assume that solar energy costs will fall by at least 10% a year for the foreseeable future. First Solar (FSLR), which specializes in large scale, thin film, industrial facilities, expects solar costs to plunge from 63 cents per kilowatt in 2014 to only 40 cents by 2017.

Storage is another key part of the equation, as panels alone can only produce electricity during daylight. The cost of home storage batteries, which are charged by day and can run a home at night, have dropped by 70% over the
past five years.

They could drop another 70%, once Solar City completes its Nevada Gigafactory in 2017. That will double the planet?s lithium ion battery capacity in one shot. A second plant is planned.

For a more detailed explanation of that technology and the investment opportunities therein, please click here for Solar Energy?s Missing Link.

What are the investment implications of all this? Clearly all of the companies mentioned in this piece are about to see their market size increase 30 fold.

But, what about everyone else?

The elimination of energy as a cost has enormous consequences for all companies. You can start with the energy intensive ones in transportation, steel, and aluminum, and work your way down the list.

The profitability and efficiency of the entire economy will take a great leap forward, much like we saw with the mass industrialization that was first made possible by electricity during the 1920?s. Share prices of all kinds will go ballistic.

Dow 200,000 anyone?

Since energy costs will eventually fall effectively to zero, that wipes out the present business model of the entire electric power industry. It will be the same as trying to sell something that is free, like air.

That will force them to morph from energy producers to power distributors. Watch this space for a future piece on this issue.

So when readers ask me for the names of shares of companies that have the potential to rise tenfold in ten years, this is one industry I always steer them towards.

To save yourself months of research on how to install your own solar system, please click here for How to Buy a Solar System.

SEIA
FSLR
SPWR
$WTIC

 

Solar Panel Installation 2

Solar Panel InstallationJoining the Brave, New World

The Solar Missing Link is Here!

I have seen the future, and it works.

In my never-ending search for my readers for ?ten-baggers,? or investments that will rise in value tenfold over the foreseeable future, I keep circling back to the solar industry.

Tesla founder Elon Musk never does anything small.

Last year he announced the first ever, economical home battery electrical storage system, which he calls the Powerwall.

The device will enable your roof-mounted solar panels to supply power to your home 24 hours a day, not just when the sun is shining.

It is an innovation on the scale of Thomas Edison?s invention of the light bulb in 1879, or the launch of the Internet in 1969, in terms of the long-term impact on our economy.

Shifting the source of a third of our power supply is a big deal.

You may recall that the early investors in these earlier transitions made fortunes, General Electric (GE) in Edison?s case, and Netscape that spun out of the early Internet days.

Today, General Electric is the only company that has remained in the Dow Average for the past 100 years. So, investors take note.

During the day, the panels will charge up the battery mounted on your garage wall, which is about the size of a big screen TV. At night, you can then run your home off battery power.

Alternatively, you can engage in what is known in the industry as ?load shifting.? Charge your battery at night when you can buy electricity for as little as 4 cents a kilowatt hour, and sell it back to your local utility during a power demand surge the next afternoon for as much as 50 cents a kWh.

Buy low, sell high, it works for me!

And what is the cost of the miracle technology?

Only $3,000 for a 7 kWh battery or $3,500 for the 10 kWh version for energy hogs, like me, who has to charge a Tesla Model S-1 every day, soon to be two.

You can also include as immediate customers for this new product sports addicts, who watch multiple games on ESPN 24/7, paranoids who keep the lights on all night and indoor pot farmers, whose energy needs are said to be prodigious. Of course, the military will be another big consumer.

I ran some numbers on the possibilities for the Powerwall and they are mind-boggling.

The average home in the US has 2,500 square feet, which uses 7,000 kWh per year, or 19 kWh per day. The current cost for this power will be around $2,000 a year, depending where you live, more in California, and less in Texas, Oklahoma, and North Carolina.

A solar/ battery combination for such a home should cost about $14,000, including installation, the panels, the inverter, and all the gizmos. Net out the alternative energy investment tax credit of 30% (IRS Form 5695 http://www.irs.gov/pub/irs-pdf/f5695.pdf ), and your cost falls to only $10,500.

That means your power savings will cover the cost of your solar investment in a mere 5 years, compared to the present 7 or 8 years. After that, your home will have free electricity for another 20 years, as the life of these systems is usually 25 years.

Make the investment, and the value of your home rises, by $2 for every dollar spent, or so local real estate agents tell me.

You also will be guaranteed against any future power rate increases, an absolute certainty. America?s power grid is currently in a woeful state of disrepair, with much of the hardware 50 years old, or more.

The demands on the power industry are also about to take a quantum leap forward, as millions of consumers buy electric cars. Tesla plans to ramp up production of vehicles from 40,000 units last year to 500,000 by 2020, when the $35,000, 300 mile range Tesla 3 achieves mass production.

Some of my over-the-horizon-thinking hedge fund friends believe that figure could hit 15 million by 2030.

Add to that new, competing electric models produced by every other major carmaker, and that?s a lot of juice that will be needed. As a result, electric power utilities will probably have to endure more structural changes to their business model than any other industry.

Trillions of dollars are needed to modernize it, and all of that is going to come out of your pocket, but only if you remain an existing power customer.

Indeed, I have already been notified by my own utility, Pacific Gas and Electric Company (PGE), that I am due for two consecutive 7% price increases over the next two years.

The battery will also provide a backup power supply for home for when the grid crashes. Twice in the last two decades I have lost a freezer full of venison, pheasants, quail, trout, and salmon that I hunted and fished when storms knocked out power, for a week each time.

The Powerwall prices are so low that they beat the cost of a conventional backup diesel or gasoline generator.

They will also wipe out most of the existing back up battery industry, as Tesla?s advantages gained through massive economies of scale are enormous. Musk is talking about producing billions of batteries.

The Powerwall is a game changer for the solar industry, which has long been hobbled by the limitation that it could only supply power for 12 hours a day, and less in the winter, depending on your latitude.

It certainly gives a shot in the arm for the solar industry, which I have been banging the table about for years. My favorite is Solar City (SCTY). Other names to look at are First Solar (FSLR) and SunPower (SPWR), which manufactures my own solar panels.

It also casts Musk?s own Tesla (TSLA) in a new light. It is no longer just a car company, but a comprehensive energy solution. Musk has already made one of the largest capital investments in history to build a $5 billion ?Giga? factory near Reno, Nevada.

Much of that plant?s production has already been pre sold, and I understand that the decision has already been made to build a second one. Wow!

Consumers are able to purchase the new batteries from the Texas based retailer, TreeHouse, (their link https://treehouse.co/treehouse-is-first-retailer-to-sell-tesla-home-battery/ ).

Musk explains that the world consumes 20 trillion kWh per year of electricity.

In the US, 1/3 of our fossil fuel consumption goes to transportation, and another 1/3 generates electric power, which is the equivalent to consuming 225 billion gallons of gasoline per year (or 8 billion barrels of oil per year, or 22 million barrels a day).

His goal is nothing less than to largely substitute those fossil fuel uses with solar energy, cutting our fossil fuel consumption by 2/3.

I guess there is no point in setting the bar low.

SCTY
FSLR
SPWR
TSLA

 

TeslaMeet the Next Light Bulb

The Game Changer for Solar

With great fanfare, congress passed a blockbuster $1.8 trillion spending bill in December. President Obama hastily signed the bill into law the next day.

Barley noticed was a measure included in the bill, which extends the 30% investment tax credit for alternative energy investments by five more years, until the end of 2021.

Barely, that is, unless you owned solar stocks.

Since the intention to include this pet democratic program started leaking out in November, shares of the entire industry doubled in value.

Solar City (SCTY) rocketed by 136%. First Solar (FSLR) soared by 81%. Even the normally quiescent Guggenheim Solar ETF (TAN) gained an impressive 28%.

Since then, these shares have given up a big chunk of their gains, thanks to the ongoing stock market correction. Better look hard at this group. They could become one of the top performers this year.

In exchange for the solar extension, the president agreed to permit oil exports for the first time in 40 years. The fact that the country has run out of storage and already has 50 filled takers sitting offshore in the Gulf of Mexico makes this an easy move.

House Minority leader, Nancy Pelosi, my local congressperson, told me the republicans were willing to ?Give away the store? to get the export measure through.

It seems that the Koch Brothers, the republican party?s largest donors and funders of global warming deniers, wanted to use the oil export measure as the means to offshore the entire US petrochemical industry.

It is headed for emerging nations, where labor is cheaper, taxes are lower, and regulation nil. That means the loss of tens of thousands of US jobs, many in California, over which Pelosi complained.

Pelosi complaining about the loss of petrochemical jobs? It?s proof that if you live long enough, you see everything.

Whatever jobs the Golden State loses here, it will make back with solar, big time. Industry analysts estimate that the five-year extension is worth a STAGGERING $125 BILLION IN ADDITIONAL SALES!

That is a multiple of the entire solar industry?s current total annual sales.

What?s more, this is five years during which the solar industry can dramatically improve panel output efficiencies, inverters, designs, and cut costs (remember that the cost of labor and regulation, about half the cost of a solar installation, is still rising).

Solar is already close to grid parity on costs now. It is even competitive in Texas. It will be substantially cheaper in five years.

During the same time, the cost of grid power will keep rising continuously, thanks to rising capital cost of replacing aging infrastructure.

I?m not saying you should rush out and buy solar today. But when the bull market resumes later this year, this group should be at the top of your list.

As for me, I am already getting estimates for a doubling of my existing solar roof system to accommodate the charging of my second Tesla, the Model X.

To learn all the ins and outs of buying and installing a solar roof system for you self, please read ?How to Buy a Solar System? by clicking here.

SCTY 1-15-16

FSLR 1-15-16

TAN 1-15-16

WTIC 1-14-16

Solar Panel Installation 2Better Bring Some More Panels

John Thomas Solar Panal

Let the Sunshine In!

Let the Sunshine In!

I?ll never forget those immortal words for the hit musical Hair, where I took my senior prom date in 1970.

I had no idea that the entire cast would drop their clothes off at the end of the first act, standing there stark naked. I remember that they guy sitting in front of me almost hard a heart attack. I didn?t know then that such words existed.

My date?s dad would not have been amused.

He was the legendary founder of Wham-O, marketer of famed novelty toys like the Frisbee, the hula-hoop, the Slinky, the Super Ball, and the Slip?n Slide, a multi millionaire, and a famed African lion hunter.

He was a real tough guy.

But he never found out. There were a lot of things he never found out, thank goodness!

But I digress.

I?m sure that California Governor Jerry Brown was humming a few bars of Let the Sunshine In this week, although I doubt he ever saw the play.

Back then, he had just graduated from divinity school as a Jesuit priest (click here for my exclusive interview with the Moon Beam governor ?An Afternoon with California Governor Jerry Brown?.

But the words would have been appropriate, for my illustrious neighbor with the great security detail signed a bill this week that brings into law the most ambitious alternative energy goals seen anywhere in the world.

Jerry?s aspiration is for the Golden State TO OBTAIN 50% OF ITS ELECTRICITY NEEDS BY 2030, IN A MERE 15 YEARS!

In 2014, the state garnered an already impressive 22% of its electricity from non hydro renewables, including solar, wind, biomass, and geothermal sources, already the highest share in the world for a major economy.

There has not been a traditional coal fired electric power plant in the state for more than a decade.

Also included in the legislation are provisions to double the energy efficiencies of homes, offices, and factories. Another goal to cut gasoline consumption by half was axed from the measure after heavy lobbying by big oil.

Lucky for me that I?m already there with my new SunPower Solar installation (click here for ?How to Buy a Solar System? ).

Jerry thoughtfully signed the bill at the Los Angeles Griffith Park Observatory, which offered a panoramic view of the legendary LA smog, the city barely visible.

Some of it is probably still coating the inside of my lungs from my childhood there in the 1950?s.

My readers in all 50 states and 137 countries are constantly begging me to tell them what the Hell is going on in California.

As a technology and regulatory leader, what is adopted here is often imitated across the country and around the world, both the good, and the bad.

You know those seat belts, safety glass, and catalytic converters you find in your cars? They are all the result of laws first passed in California. But then it?s always easy to pile regulation on the industries entirely based out of state.

It doesn?t always work out so well. Adolph Hitler entirely imported the state?s racial purity laws to Germany during the 1930?s, and we all know where that went.

But that is a story for another day.

Of course, there are many who say that the lofty 50% target is unobtainable, or will drive us all broke if we ever get there.

But there is one fact that is utterly undeniable. This will be an absolute windfall of the US solar industry, which has the only technology advanced enough to meet governor Brown?s aggressive targets.

There is, in effect, a solar Moore?s Law that sees efficiencies per dollar spent doubling every four years, such as we have already seen with the faster growth of microprocessor efficiencies since the 1960?s.

Exponential growth of efficiencies will bring exponential growth of company profits.

Annual installations of photovoltaic panels have soared from a token 0.3 gigawatts in 2000 to an impressive 45 gigawatts in 2014, more than enough to fuel 7.4 million American homes.

They are about to grow much larger.

This is all happening because of the simultaneous maturing and cross-pollination of technology, regulation, financing, and venture capital.

A key development was the Chinese entry into mass production of solar panels during the late 2000?s, which led to a near immediate 80% collapse in prices. They now control 70% of the global market.

For the first time in history, solar power is now cheaper than grid power on a non-subsidized basis. Costs are set to still fall dramatically from here.

Fossil fuels are about to become, well?fossils.

The Paris based International Energy Agency, no slouch when it comes to analyzing power data, predicts that solar will account for 27% of the global supply by 2050, and will become the biggest single source.

But futurologist friends of mine, like Tesla?s (TSLA) Elon Musk, Google?s head of engineering, Ray Kurzweil, and cosmologist Dr. Stephen Hawking, believe there is no reason why it shouldn?t be at 100% by 2030-35.

To quote Kurzweil, ?we are only six more doublings away.?

Hillary Clinton wants nothing less than to eliminate all oil and gas tax subsidies worth $100?s of billions, and shift the money to alternatives.

That is a radical move.

Her goal is to increase the solar share of American power generation to 33% by 2027. To expect that this will cause the shares of solar companies to skyrocket is an understatement of the highest order.

Improving solar cell efficiencies promises to take us further and faster into this brave new world.

My own SunPower (SPWR) X-335 panels, with their patented Maxeon solar cells (made in Georgia), convert 20.3% of the sunlight they receive into electricity, the highest in the industry. Cheap imported Chinese panels offer efficiencies as low as 15%.

University labs have perfect cells with 45% efficiencies using advanced silicon compounds. I happen to know that the military has a 65% efficient cell. All that remains are the economies of mass production to bring them to the public market.

This is crucial for the solarization of the global economy. Every 1% improvement in efficiencies cuts that total cost of a new installed system by 5%.

With the trends already in place, it is safe to assume that solar energy costs will fall by at least 10% a year for the foreseeable future.

What are the investment implications of all this? Clearly, the solar industry is about to see its market size increase 30 fold.

Here is the great thing about solar shares.

They have been mercilessly beaten down by the recent collapse in oil prices, which is trading at the $30 handle as I write this, even though its business prospects are vastly improving.

Oil is giving you a once in a lifetime entry point into solar.

Call it guilt by association. Isn?t energy just energy.

These investment plays are the obvious ones that I have been recommending for the past couple of years. They include Solar City (SCTY), First Solar (FSLR), SunPower (SPWR), and more recently, Sun Edison (SUNE).

If you want a broader diversification, you can buy the (TAN).

TAN 1
0-9-15

SUNE 10-9-15

SPWR 10-9-15

SCTY 10-9-15

Jerry BrownWay to Go Jerry!

Solar Panel Installation 2

John Thomas Solar PanalCount Me In!

The Big Milestone for Solar

I am writing this to you from a dive boat headed for the Molokini Crater off the coast of Maui in Hawaii. The rolling of the boat makes typing challenging, so please excuse me for more than the usual number of typos.

In the distance farmers are burning off their harvested cane fields, creating giant plumes of smoke, a practice banned in the continental US decades ago.

A pod of dolphins are racing the bow of the boat and humpback whales are blowing their spouts on the horizon. Periodically, the boat scares up a school of flying fish going airborne to find safety.

Life is good.

Another thing I have noticed cruising off the Maui leeward coast is that almost every building has solar roof panels. Of course, the incentive here is huge, as costly imported fuel for power plants makes electricity in Hawaii 20%-50% more expensive than it is on the mainland.

By now, you probably are sick to death of my banging on about the fantastic investment opportunities in the solar industry. But I am not recommending the sector because I wear Birkenstocks, eat organic bean sprouts and recycle even my vegetable waste. Putting money into solar now also makes solid business sense.

Did I also mention that it prevents millions of tons of carbon from entering the atmosphere, or about 5 tons per household per year?

With the stocks expected to rise by ten times over the next decade, you better get ready for more abuse. The solar industry is about to cross an epochal, sea changing benchmark.

Thanks in part to heavy competition from China, South Korea and Japan, the cost of solar panels has collapsed by 75% over the past four years.

Indeed, Chinese flooding of the US market with cheap imported panels almost wiped out every American producer. If you don?t believe me, then check out the long-term stock charts.

More importantly, the cost of industrial, utility sized solar power plants has fallen by 50%.

Only four years ago, large solar power plants made economic sense only after heavy government subsidies were included. They were all part of a ?stimulate the economy and save the world? philosophy demanded by the global economic collapse.

Now we are about to attain the Holy Grail: solar that is profitable on a stand-alone basis.

Don?t get me wrong. Subsidies are nice, as the oil and gas industry well know. I have been sidling up to the trough myself lately with my own solar projects (more on that in a future research piece). But subsidies are no longer the lifeblood of the business.

The economics of solar roof installations are now so compelling, that they are going up everywhere across the country. In fact, everyone on my street has one except me.

That is because the technology, which I keep close track of, is evolving so quickly that it has paid to wait. I did the same when I skipped six track tapes and waited for eight tracks ones, ignored Betamax in favor of VHS, and passed on Windows 1 (which always froze), but soaked up Windows 2.

A solar installation now also protects you from the hefty price increases that will be demanded by your local utility to pay for long overdue infrastructure upgrades.

I am also holding out for the best possible deal (you know me). With one Tesla Model S in the garage, and a Model X on order, I also happen to be one of the largest residential electric power consumers in the state. So, we?re not talking small beer here.

This is starting to have a sizeable impact on the American electricity market. A reader who works for Southern California Edison (SCE/PF) has told me that the cumulative effect of millions of home silicon roof panels is now so great that the traditional daily afternoon power demand spike is starting to disappear.

Even Saudi Arabia is building solar plants now, and they have access to nearly unlimited crude at a mere $5 a barrel.

The Spanish engineering company TSK has just signed a contract with Dubai to build a sizeable, state of the art 100-megawatt photovoltaic plant. The production costs there will work out to just $5.85 a kilowatt hour.

For oil to be competitive with this capital cost, the price would have to stay under $50 a barrel for the next 20 years. Technological advances on stream will make solar competitive at $20 a barrel in a year or two. This explains why some $2.7 billion worth of solar contracts with the Middle East are currently in negotiation.

Oil poor states are rushing even faster to the solar panacea. Jordan is planning to obtain 20% of its power from alternative sources by 2020, while Egypt has set a more ambitious 20% target. Morocco, which I will be visiting this summer, is the most aggressive, with an impressive 42% goal.

All of the means dramatically falling costs and soaring revenue for the solar companies. That sounds like a great business plan to me.

The usual suspects here include First Solar (FSLR), at $11 billion, the largest capitalized behemoth in the industry, and the master of thin film technology. Their power plant near Las Vegas is a sight to behold from the air.

There is Solar City (SCTY), Elon Musk?s highly competitive entry in the field, which will be able to draw from Tesla?s massive $6 billion giga factory in Reno, Nevada.

Sunpower (SPWR) is the Rolls Royce of the solar industry, producing the highest efficiency rated 340-watt panels (thanks to the pure copper substrate), which I will soon be installing in my own home. Love that biochemistry degree!

You could also go risk averse and buy all of them through the Guggenheim Solar ETF (TAN).

The key here is the price of oil, which has unnecessarily dragged down the shares of solar companies over the past nine months. Once it bottoms, if it has not already done so, it will be off to the races.

While your big cap oil majors might add on 40% in value in any recovery, the solars could be in for a tenfold return.

Back to me whale watching. Thar she blows!

SPWR

SCTY 4-2-15

FSLR 4-2-15

TAN 4-2-15

Smoke Plumes

Diving Boat

Molokini Crater

John ThomasBusy Thinking Great Thoughts

Why Solar Stocks are Catching on Fire

Long time solar observers were stunned by the news that First Solar (FSLR) and Sunpower (SPWR) were teaming up to create a joint venture.

The stock market certainly got the message. Sunpower rocketed by 18%, while First Solar soared by 17%.

Imagine Macy?s merging with Gimbels, Coke tying up with Pepsi or the Los Angeles Dodgers teaming up with the San Francisco Giants?

It?s a little more complicated than that.

The move further convinces me that solar is one of the few industries that could offer investors a ten-bagger over the coming decade. Revenues are soaring, costs are plunging.

Throwing the fat on the fire are generous government subsidies that create a massive incentive for consumers to go solar by the end of next year.

The entity that (FSLR) and (SPWR) are forming is known as a ?yieldco.?

A yieldco is a publicly traded company that is formed to own operating assets that produce a predictable cash flow. Separating volatile activities (like research and development and construction) from stable and less volatile cash flows of operating assets can lower the cost of capital.

Yieldcos are expected to pay a major portion of their earnings in dividends, which may be a valuable source of funding for parent companies which own a sizeable stake. They are commonly used in the energy industry, particularly in renewable energy to protect investors against regulatory changes.

Yieldcos are in effect first cousins to other high yielding securities like Master Limited Partnerships (MLPs) and Real Estate Investment Trusts (REITs). Yieldcos give investors a chance to participate in renewable energy without many of the associated risks.

The announcement came on the heels of blowout earnings announced by the two companies. SunPower said it expects to install another 215 megawatts of generation in 2015 and that its project pipeline now totals more than 4,000 megawatts.

First Solar became the first solar photovoltaic (PV) maker to install 10,000 megawatts of capacity last month. Its project pipeline exceeds a monstrous 2,600 megawatts.

A 30% tax credit on any alternative energy investment is set to expire at the end of 2016. I think this will trigger the mother of all stampedes by consumers to buy solar systems while they can still get the government to pick up one third of the tab.

The entire solar industry looks attractive here. Collapsing oil prices has had a leveraged effect on solar shares, dropping them a heart stopping 40% in only three months.

Heaven knows investors are starved for cheap stocks these days.

There is one cautionary note to add here. The government subsidies that help float the company expire in 2017, making the entire proposition financially less attractive. That is, unless they get renewed.

Think President Hillary.

The only things that would save them are dramatically higher conventional energy costs. However, right now energy costs are heading the opposite direction, thanks to fracking and a well-publicized war for market share at OPEC.

SPWR 2-24-15

FSLR 2-24-15

SCTY 2-24-15

Solar Panels

Solar Stocks Get a Jolt

The blockbuster for me in President Obama?s budget speech on Monday was his suggestion that the 30% alternative energy investment tax credit be made permanent. All solar stocks, including front-runners Solar City (SCTY), Sun Edison (SUNE), and SunPower (SPWR), rocketed on the news.

Now slated to expire at the end of 2017, the tax break is credited with igniting a solar building boom in recent years. Solar panels are becoming commonplace on roofs in better off residential neighborhoods across the country.

They are becoming so pervasive that they are changing the market for electricity beyond all recognition in lead states like California. The afternoon demand spike, once a regular feature of power management, is rapidly disappearing as consumers now sell excess peak electricity back to utilities at favorable rates.

Of course, this is all wishful thinking on the part of Obama, who couldn?t get a Republican led congress to agree with him on what day it is. Still, it has been outlined a priority with the administration, and could be a bargaining chip used in some broader tax compromise with the opposition.

And where President Obama mail fail, a future President Hillary may succeed.

Indeed, there has recently been an onslaught of good news showering the solar industry. China has announced a 43% increase in its installed solar base, an increase of 15 gigawatts. At the very least, this will divert cheap Chinese made panels from flooding the US market, the recent punitive import duty notwithstanding.

A 15% rally in the price of oil over the past three trading days has also provided a major assist. Solar actually has nothing to do with the price of oil. Its main competitor is the retail cost of electricity, which is driven by future capital spending budgets of local utilities. That has costs rising as far as the eye can see, as the industry replaces aging, 100 year old infrastructure.

The market sees it otherwise, which lumps all energy firms in the same category, be they oil, fracking, natural gas, coal, or even nuclear. Whether it makes sense or not, solar stocks are still tarred by the price of oil. Check out the charts below, and you find a correlation that is almost perfect.

The great irony in the president?s proposal is that solar is now profitable even without the tax breaks. They just provide the juice to accelerate widespread solar adoption.

I think solar is one of a handful of industries that could generate a tenfold return over the coming decade. Costs are plummeting, profit margins are expanding, and the overall market size is growing by leaps and bounds.

The fact that you can buy them now 40% off of their recent peaks is a gift. A $30 recovery in the price of oil could bring a 40% recovery in the shares of the oil majors. It could deliver a ten bagger for solar companies.

Let me pass on a little tidbit I picked up from Solar City a few weeks ago. By the end of this year, used Tesla Model S-1 batteries will become available in large numbers for the first time, including my own. (SCTY) plans to offer these for sale to their customers as backup batteries for home use. One battery can store three days worth of normal power consumption. This would make customers totally independent of the power grid.

No mention has been made of prices. My guess is that since these lithium ion batteries cost $30,000 new, a second hand one should come out at $10,000. These will still have 80% of their original capacity, not enough for a long-range car, but plenty for home storage.

For more depth on Solar City, please refer to my recent piece, ?Loading the Boat with Solar City? by clicking here.

SCTY 2-3-15

SUNE 2-3-15

SPWR 2-3-15

WTIC 2-2-15

Solar Panel InstallationMeet the New Bull Market