Green Investing

Choosing investments options that support your environmental concerns can be a challenge. Attempting to structure your portfolio around emerging green technologies has historically proven to be less profitable. Some of the prime examples in this regard could be the companies like Evergreen Solar Inc. and Coda Automotive that not only had strong investor support but also substantial government backing by way of low or no interest loans and tax incentives. If it is difficult to choose a winning stock with millions of government backing to support it, then simply choosing one based on its own financials would be somewhat difficult and impossible.

Another concern to the planet conscious investor is the fact very often the information you are looking at is based only on its holdings in it home country. A large corporation often has manufacturing plants scattered widely throughout the world. A primary reason for this is less regulatory requirement in some regions of the world than others. The fact a company has an award in the US or Europe for operations there says nothing about its stewardship in less monitored areas.

How to Balance between Profit making and Green Investing

As with any investing, your strategy must include areas you can expect to make reasonable profits in. If you cannot
accurately determine a company’s commitment to the environmental programs when choosing from the mainstream companies or newer/ start-up green technologies which need to be reserved for high risk capital only, then there are few choices left. One area that has shown growth is in the construction sector. While green technology companies have been hit or miss with far more misses, the growth of construction companies in the last 2 years has been impressive and choosing the ones that specialize in the field of construction implementing environmentally sound building practices can be as close to a sure bet as you can get. The difficulty in them is that most of them are privately held stocks, so investment opportunities are limited.

One area that you invest in with high profit expectations is in the Foreign Currency Exchange markets. Trading currencies you are simply facilitating global trade rather being forced to choose a particular stock to support. This is obviously speculative investment, but also gives the opportunity to earn high returns equally well in an up or down global economy. While considered a risk capital investment by most when trading on the Forex, it will still help diversify a limited portfolio.

To balance off the higher risk of your Forex and Green technology emerging stocks, look at government and municipal bonds being sold to fund environmentally progressive projects such as solar installation into public buildings and clean water or air initiatives. These will provide small, but relatively safe returns that still make clear where your values lie. You may also consider making your commitment known by the purchase of Renewable Energy Certificates to help sponsor and endorse clean energy initiatives.

The Chinese have captured the global solar panel manufacturing industry by investing billions of dollars in building almostSolar Panels 40-50 GW of capacity even when the global demand is about 30 GW. Their low cost manufacturing has bankrupted erstwhile solar panel leaders such as Q-Cells, which have been bought for pennies to the dollar by Chinese giants as Hanergy. Major US solar panel makers such as Evergreen Solar, United Solar Ovonics have also gone under as they are unable to match the super low costs of Chinese solar panels. The US government imposed moderate CVD and AD duties on Chinese imports of solar panels last year. Europe also started an investigation into solar panel imports into Europe.

Will Europe loose the battle with China

However, Chinese pressure has made Europe buckle as major countries such as Germany were not willing to offend China which is one of the biggest export markets for German companies. After imposing a preliminary duty of 11.8%, both sides started negotiating. The Chinese took a very hard-line position. They have showed the stick by imposing 50% plus duties on imports of polysilicon from the USA. They did not impose big duties on poly imports from European poly factories of Wacker. The two sides have now finally signed an agreement in which China will be allowed to export 7 GW of solar panels at a minimum price of 56 eurocents/watt. This is a victory for China as European demand will be around 10-12 GW this year. The European companies will find it difficult to match the minimum price set, which means that the Chinese companies will be able to meet their full quota.

I think Europe has taken a prudent position, as most of the European solar manufacturing is shut down anyway. If they had not given China an opening, it would have unnecessarily started a mini-green trade war between these 2 trade blocs. Chinese solar panels would have been substituted by Korean/Taiwanese/Indian solar panels. This would not have helped the European cause anyway. The European solar industry also benefits from cheap Chinese solar panels which helps in lowering the overall installation cost of solar systems. I don’t think that the German and Italian solar booms would have been possible without the massive influx of super cheap solar panels from China. Solar panel prices have gone down from $4/watt in 2009 to around 60c/watt currently and this has been mainly due to massive investment by the Chinese companies which has substantially lowered the costs.

Solar Wafers are traditionally manufactured by growing polysilicon crystals in specialized furnaces. These crystals are then sawed to make thin slices of purified polysilicon which is then acted upon by various chemical processes to convert them into solar cells. There have been a number of companies in the past that have tried to find an alternative cheap way to make these solar wafers. The companies have tried to cut down the crystal growing and wafering processes by directly converting the polysilicon or silence gas into wafers.

Read on GWI about Global Solar Thin Film Companies.

Evergreen Solar was the first successful company to use a different “ribbon” approach to make solar wafers. The company enjoyed sharp growth and saw its stock price soar in 2008. However, the company could not compete with the low costs of traditional wafer companies. Also its wafers were not compatible with most of the cell making equipment used by most cell and module makers. The company also used to make cells and panels itself and did not license the technology. The company is now bankrupt unable to compete with the larger players. Evergreen Solar planned to shutter US factories to open a solar plant in Wuhan, China with Chinese government support. Evergreen Solar literally cried for government support without getting any.

Crystal Solar is another company that is now coming up with a thin wafer process and is backed by NREL. The company hopes to cut the module cost by half as it starts production in 2014.

I have seen a number of past cases where start-ups have bragged about totally changing the industry and then going bankrupt. Solyndra, Nanosolar, Sulfurcell, Energy Conversion Devices and the list goes on and on. It will be interesting to watch whether Crystal succeeds or joins the huge graveyard of solar start-ups.

PV-Tech

US-based ultra-thin silicon wafer start-up Crystal Solar is planning to complete pilot production of its ‘Epi Thin-Silicon’ technology this year with volume production targeted sometime in 2014.The company claimed its technology would result in overall PV module production costs being reduced by approximately 50%. Dow Corning had also previously announced that it would work with Crystal Solar to jointly develop new products for building-integrated PV applications, using its ‘direct gas to wafer’ process for ultra-thin wafers.

Introduction

The whole solar industry has been facing a massive overcapacity problem since the beginning of 2011. Thousands of solar companies have gone bankrupt, but the solar glut has yet to resolve itself. The biggest solar companies continue to reduce capacity and fire thousands in order to adjust to the “new normal”. China is particularly vulnerable as the country has a huge solar manufacturing base with an estimated 400,000 people being directly employed by the industry. The prospects of sanctions by the EU has sent chills down the spines of the biggest solar panel companies – Yingli Solar (NYSE: YGE), Trina Solar (NYSE: TSL) and Suntech (NYSE: STP). The reason is that China exported almost 20 billion euros worth of solar panels to Europe in 2011.

Why Global Solar Panel Wars are occurring

The rapid decline in costs achieved by the major China companies has thrown the business models of other solar companies in a complete disarray. Chinese solar majors not only managed to drastically decrease the cost of making solar panels, but also expanded capacity at an exponential rate. This has led to a situation that despite the rapid growth in global demand, the industry is facing a massive oversupply of solar modules. Western Countries annoyed by the decimation of their solar industry and jobs have retaliated by either imposing or planning to impose duties on Chinese solar panels imports. Many countries and regions have also tried to protect their nascent solar manufacturers through domestic content rules. These have become contentious issues with Japan and China complaining to the WTORead more about the how global solar panel wars have panned out till date.

Past actions on the Diplomatic Front by China

China has been proactively trying to help its solar industry due to the fear of what would happen if the 400,000 jobs in the solar industry disappeared all of a sudden. The industry had become bloated mainly due to the heavy subsidies given by the local Chinese government and banks. Now with capacity almost double that of global demand, the whole industry is sick. The glut of Chinese solar panels has made the other governments angry as thousands of western solar manufacturers have shut down with many of them making media headlines such as Solyndra, Q-Cells, Abound Solar, Evergreen Solar etc. The Chinese Government instead of reducing its support has been fighting through measures like:

a) Protesting about the subsidies given by the US government to the cleantech industry.

b) Filing a case against Europe in WTO about the local domestic content requirements for solar panels by Italy and Greece.

c) Starting an anti dumping case against polysilicon imports as it tries to leverage all its cards. However the problems have kept on growing with India planning to impose duties on imports of cheap solar panelsto protect its dying domestic makers like Tata Power, Indosolar, Websol and others.

New Chinese Moves being Planned

1) Increase Chinese Solar Capacity Target from 21 to 40 GW target by 2015 - China is proposing to drastically increase the domestic installations from around 21 GW by 2014 to 40 GW. This would mean that almost 7-8 GW of solar panel capacity would be installed each year till 2015 giving a lifeline to the beleaguered domestic firms reeling from huge overcapacity and underutilization. It would benefit the biggest solar module companies like Yingli , JA Solar (JASO), LDK and Suntech who have a substantial presence in the domestic market.

2) Polysilicon duties of 30-50% on imports of polysilicon - The Chinese government may impose the AD duties before imposition on European duties. This will help its polysilicon producers 90% of which have already closed down. Only a few companies like GCL, Daqo (NYSE: DQ), Renesola (NYSE: SOL) are producing poly at this point, that too at 50% utilization even as poly imports have surged. This won’t have a big impact on consumers of poly as prices are expected to go to $18-20/kg from $15/kg now which would add at most 3c/watt cost for the overall modules. Note LDK has completely stopped production despite having a 17000 ton capacity.

3) Doubled outlay for Golden Sun Program - Recent reports indicate that China has added almost $1 billion in support under the Golden Sun Program with subsidies going to 100 solar panel makers and developers to urgently boost the cash strapped companies.

4) Bank Support - Chinese banks are an extension of the government and give credit based on government diktat rather than profitability. They continue to support bankrupt companies and are giving even bigger loans to solar companies despite western criticism. Jinko Solar, the 7th biggest module supplier got a $1 billion credit line from CDB.

Which Stocks are the Worst Affected

Chinese solar stocks for the most part trade together as a group and its very hard to pick winners and losers on a sustained basis. However during the last year , the extended downturn has led to a sharp decline in the worst performers such as

1) LDK Solar (NYSE: LDK) - The company with a debt of more than $3 billion and book value of less than $50 million is in the worst shape of all the Chinese solar stocks. I have already reviewed their problems in an earlier post of how they have stopped polysilicon production completely and is firing thousands each quarter. The company is trying to raise more debt to restart operations but outlook looks bleak.

2) Suntech (NYSE: STP) - Suntech Power is the second worst stock in the group and has been spending time in pennydom for the last few months as news of a fraud has made the company lose millions of dollars at a time when it can barely afford to lose even a penny.

The other Chinese solar stocks have also declined as well but they are not in the dire straits as the two discussed above. The best performers have been companies with low debt ratio, low costs and with good operations management eg. Renesola and Jinko. The better solar stocks have also outperformed as the market has started pricing in bankruptcy for the worst companies.

Summary

There is no free market capitalism in the solar industry which has resulted in such a deep and prolonged downturn in the industry. The excesses are not going away and the weaker players (LDK, Suntech) continue to survive due to government largesse. The Chinese government continues to prolong the pain by giving billions of dollars in subsidies preventing the industry from returning to a healthy demand supply balance. The recent Chinese moves have led to a temporary rally in stocks. But a sustained up move is difficult unless the noncompetitive capacity and players are removed from the market. That will only happen if the Chinese government stops giving handouts and bailouts. Till then the Chinese solar stocks will keep moving like a yo-yo.

Read about Cheap Solar Panels.

US Solar Panel Manufacturers have been under siege from cheap Chinese solar panel imports leading to a closure of a number of solar module factories. Small and big solar companies have been facing difficulties and some like Solyndra, Abound Solar have sought protection in Chapter 11. Even established companies like Evergreen Solar have been forced into closing their factories as they were simply unable to compete with the cutthroat module prices from China, Taiwan and other Asian countries. The US Government recently imposed duties on imports of Chinese made solar panels to even out the field for US Solar module maker. However it remains to be seen whether this helps the small US solar panel makers like Mage Solar given that Chinese companies have a massive cost advantage over Western solar companies.

Mage Solar USA

MAGE SOLAR USA is a  Georgia based solar panel manufacturer which was founded in 2007 in Germany and started operations in USA in 2009. Mage Solar AG is a 100 per cent subsidiary of Mage Industries Holding AG of Germany. The company sells solar panels for  residential, commercial, agricultural and utility scale applications. Mage Solar is a subsidiary of the MAGE GROUP which has a presence in  20 countries across four major business sectors worldwide. Mage Solar is active in the USA, Italy, France, Czech Republic, Turkey, China, Benelux countries, Spain, Slovakia, Great Britain, Greece, North Africa, Australia and Middle East. In March 2011 the company began to manufacture modules at its US location.

Mage Powertec Plus Solar Panels

The company sells solar panels under the MAGE  POWERTEC PLUS brandname. The company assembles the solar panels in the US and can take advantage of the “Buy American” provisions Mage Solar sells 6 different solar panels which are listed below

The company sells both polycrystalline and monocrystalline silicon solar panels in the 235 to 250 watt range. The Mage 250 watt solar panels are made of monocrystalline silicon cells which have higher efficiency than the normal multicrystalline silicon cells which are used in the lower watt solar panels. The company has also introduced an AC module which comes with an inbuilt microinverter.

The company also sells solar inverters and solar mounting systems under the Mage SystemTec brandname.

Mage Solar Warranty

Mage Solar gives a 10-year product warranty and a 30-year 80% performance guarantee. The company gives a 90% performance warranty for the first 12 years which decreases to 80% for the next 10 years. The company  has a Underwrites Lab certification and is also ARRA-compliant.

Mage SystemTec Mounting Systems

Mage Solar sells  mouthing systems under the MAGE SYSTEMTEC brandname which can be used  wide array of pitched roofing applications, including asphalt shingles, roof tile or metal roofs.

Mage Solar Inverters

The company does not manufacture solar inverters on its own but sources them from solar inverter producers such as Fronius, SMA and SolarBridge. SolarBridge makes microinverters which are used in its AC modules.

Mage Solar Panel Prices

The prices of Mage Solar Panels are higher than that of Chinese solar panels because the modules are assembled in the US which leads to higher costs and higher prices. There is no one pricing given the dynamic nature of solar panel pricing and depends on volumes as well. However with duties on imports of Chinese made solar modules, Mage Solar Panels are more competitive though they are still priced higher. Note currently top rated solar panels from the biggest companies like Trina Solar Panels are sold in Chinese factories for as low as 70c/watt which means just $175 for a 250 watt solar panel.

Mage Solar Academy

Mage Solar has started a solar training academy which makes it quite unique amongst solar panel makers. The company offers lectures and practical training on the following topics

  • Solar PV 101 – Entry Level (40 hours)
  • Advanced Solar Business & Technical Sales (40 hours)
  • NABCEP Installer Exam Prep 801 (16 hours)
  • Fundamentals of Solar Business & Technical Sales (8 hours)
  • PV Field Inspectors 302 (8 hours)
  • Real Estate & Insurance 301 (8 hours)
  • Electrical Grounding & Bonding 401 (8 hours)
  • Solar Civics 701 (3 hours)
  • OSHA 10 (10 hours)
  • OSHA 30 (30 hours)

Source : http://www.magesolar.com/us/mage_solar/mage_solar_academy.html

 

 

USA Solar Companies surviving the Downturn

The Solar Industry has seen a massive shakedown with hundreds of bankruptcies and thousands of jobs lost. There has been no solar energy company which has been left unaffected by this brutal consolidation. Even the biggest solar panel manufacturers have seen huge losses and restructuring. The biggest solar companies are now trading in pennies and some like Q-Cells have become footnotes. USA too has seen its share of tragic shutdowns like Solyndra, Abound Solar, Evergreen Solar etc. Some others like Sunpower, Ascent Solar, Miasole have been bought by foreign companies. The companies which have thrived under the Chinese panel oversupply condition are the solar installers and integrators who have benefited from falling PV system prices. Solar City has been the fastest growing big solar company in the US thanks to aggressive expansion and good management. Here we list out the top.

Solar Installers

1. Sungevity - Sungevity is a California company targeting the residential market through a solar leasing plan. It extensively uses the Internet to design the system and has a JV with US Bank to provide financing to its customers.

2. SolarCity - SolarCity is a full-service solar provider for commercial and residential customers and does solar power system design, financing, installation and monitoring services from a single source. SolarCity is introduced  a new solar lease option, called SolarLease. It also has other options like PPA. The company’s footprint extends to Arizona, California, Colorado, Maryland, Massachusetts, New Jersey, New York, Oregon, Pennsylvania, Texas and Washington D.C.

3. SunRun – SunRun is one of the newer solar installation and solar financing companies that target the residential market mainly. The company is present mainly in the Western  part of USA operating in 7 states Arizona, California, Colorado, Hawaii, Massachusetts, New Jersey, and Pennsylvania. The company uses a PPA model to sell solar systems and has partnered with a number of pure play solar installers.

4. Verengo Solar - The company also provides solar financing solutions and is present in the California market.

5. Borrego Solar - The company is similar to Verengo Solar but mainly concentrates on the commercial market. The company signed a deal with Chinese solar panel producer Yingli for procuring solar panels. The company is headquartered in California like most others.

Solar Raw Material Companies

1. MEMC/ Sunedison- The only big American solar wafer producer left is also one of the biggest manufacturers of semi wafers. The company has sharply reduced its wafer production despite a new factory in Malaysia as prices are below costs. The company’s majority sales now come from the solar installation/ development division of Sunedison now. The company has also closed down most of its polysilicon production due to low prices. MEMC is strongly expanding the system installation business not only in the US but other parts of the world like India, Europe, Korea, Canada and other places. The company recently installed one of the biggest solar plants in the world in Rovigo, Italy.

2. Hemlock Semiconductor (HSG) - This a a privately held company which is a JV between Shin-Etsu Handotai, Dow  Corning and Mitsubishi. Hemlock has the largest poly production capacity in the world and has been trying to rapidly raise capacity to meet growing solar demands. However it has not grown fast enough.

Solar Panel Manufacturers

1. First Solar – First Solar is the only Solar Thin Film Manufacturer in the world and a benchmark for other thin film companies thinking of making it big. The company was promoted by Wal-Mart promoters and has seen remarkable growth in the last few. This US based company uses Cadmium Tellurium (Cd-Te) Technology and  is the lowest cost panel producer in the world today if you don’t include any penalty for low efficiency. Even if you penalize the Cd-Te Technology for its lower efficiency vis-a-vis the higher efficiency crystalline technology, First Solar is clearly the leader with a core cost of 74c/watt. The company has a roadmap of reducing the cost to 52c/watt by 2014 and given its track record it seems quite achievable. There is little doubt about First Solar’s ability to survive and flourish due to its massive first mover advantage.

2. Sunpower – Sunpower is a vertically integrated solar energy company known more for its highest efficiency solar panels. The company bought Powerlight a few years ago to enter the solar systems market and has bolstered the business constantly to become a major global installer. Sunpower is present in all 3 segments of the solar systems business namely a) residential b) commercial and c) utility. It is one of the largest US installers and has recently won a number of large utility contracts for building solar farms.

Solar Thermal / CSP Company

1. Brightsource Energy - Solar Thermal Startup Brightsource Energy has managed to raise $500 million in multiple rounds of financing from top PE firms as well as Alstom.The company is building its first plant at Ivanpah which has got the backing of the US government. The  Ivanpah plant got a further boost when NRG Energy,USA’s largest renewable energy utility invested $300 million of its money into the plant.Brightsource Energy  seems to have a brighter future with its unique CSP technology. Also with backers like Alstom and Bechtel,it has the heavy engineering support to construct the massive 392 MW plant.

2. eSolar – eSolar is one of the most exciting startups in the US Solar Technology.The company uses a unique Concentrating Solar Power (CSP) Technology which utilizes small, flat mirrors which track the sun with high precision and reflect the sun’s heat to a tower-mounted receiver, which boils water to create steam. This steam powers a traditional turbine and generator to produce solar electricity.The comany has won contracts to build its CSP plants in USA,Greece and China.

Solar Inverter Companies

Power-One - The US power management company has shown the fastest growth in 2012 and has increased its marketshare to around 13% to become the No.2 global player. Power-One is mainly concentrated in Europe and is now expanding to Asia and its home market of USA.The company despite job losses looks a survivor despite strong completion from China. One of the few big inverter players left after Satcon bankruptcy.