2012
January 31, 2012
I receive a lot of inquiries regarding how to enter the solar industry . Note the Solar Business is one of the fastest growing industries in […]
January 31, 2012
This is not my usual type of blog post about industry or economics but more in the realm of philosophy. We are taught during most of our childhold and teen years that ability and hard work are the most important determinants to our future lives. You should study and work hard to make yourself a better human being etc. etc. However one thing that never enters the mind of the young is the importance of luck in our lives. I never put much thought behind the luck , kisment ,destiny before reading Nassim Taleb's famous life.
January 31, 2012
Solar Power in India has taken off under the ambitious JNNSM government subsidy scheme with almost 400 MW of Solar Capacity installed in 2011 . With various states like Gujarat, Karnataka coming up with aggressive solar subsidy schemes on their own as well, solar power capacity in India should surge by around 1 GW in 2012. This has made India one of the fastest growing solar markets in the globe right now.
January 31, 2012
India's Real Estate Companies have seen a very tough 3-4 years with interest rates climbing, investors running away from shoddy accounting and the global macro scene being quite bad. One needs only to look at the stock price chart to see times have been very bad. Besides some of these companies have come under court scanner for their practises with Unitech CEO spending some months in jail for a telecom scam. However property prices have not come down as India's real estate bubble seems immune from crises in the West and in India . Prices have more or less remained stable while other assets have seen a major carnage at one point or the other.
January 30, 2012
Finding accurate Solar insolation data is a difficult problem faced in most countries except Europe and USA. The reason is that there is no history of solar radiation data in most countries as solar power is a relatively new technology. Most of the solar developers rely on data from NASA, DOE and European agencies which focus mostly on their domestic geography. This leads to faulty and inaccurate solar radiation data for other places which are seeing massive solar boom due to falling solar panel prices. India which installed 400 MW of solar power plants in 2011 and should see another 1000 MW in 2012 faces this problems also. There are no devices to record solar insolation in India with data coming from outside.
January 30, 2012
The Solar Products Business is booming not only from the Solar Power Plants but also in consumer products business. Sol not are big conglomerates like Mahindra, GMR , Reliance getting into the lucrative booming solar power in India, but now water purifier companies in India are too getting into the act. India's biggest water purifying company Eureka Forbes which is found in almost every Indian home is going to start selling solar lighting products like torches and lanterns.
January 27, 2012
The Chinese Dominance of the Solar Industry in the last 2 years have seen numerous Western companies go bust . This has accelerated sharply in 2011 with companies like Evergreen Solar,Spectrawatt, Solar Millenium, Solon, Photowatt etc. either gone for good or in various stages of bankruptcy. Other US Solar Panel Manufacturers like First Solar, Sunpower have fired thousands and some are continuing with large losses. European Solar Companies are the worst off given their high cost structure and lack of differentiation. Solland Solar recently killed its solar module line while some like Schott have killed their solar wafer lines.
January 27, 2012
So what are the criterea for staying alive in 2012
a) Government Support in Some Form - Most of the Tier 1 Chinese Solar Companies will fall into this bracket. However given that there are so many you would have to look at the biggest like Suntech, LDK, Yingli for survival in any case. LDK is a BANKRUPT COMPANY ,the only reason it continue to produce a solar panel is because of the Chinese government support
b) Low Cost - Though seems like an obvious idea, there are still companies existing which have high costs like Q-Cells, REC. You just can't invest in them given that even low cost is a necessary though not sufficient condition to survive
c) Branding - Very necessary to get financing for solar projects as without a brand you are not bankable and will have to sell at a 10% discount in a market which is already selling at below cost
January 26, 2012
Quick quiz. What is common to Suzlon, Moser Baer, Indo Solar, Websol Energy systems and Orient Green Power? All these stocks had successful runs on the stock market and hyped as the next game changers in wind energy, semi conductors, solar power and hydel/geo thermal power. Valuations were more on growth stories than through an hard nosed DCF spreadsheet. But now, they trade at record lows(like other stocks but what is different is the pressing fundamental concerns in each case). Is this a bubble finally bursting, or are investors panicking?
January 19, 2012
Solar Jobs have been cut in the tens of thousands this year by a number of European Solar Companies including marquee names such as REC, Q-Cells, Solarworld ,SMA Solar besides many of the smaller names. Some of the solar companies like Solon have completely shut down. 5000 solar companies have downed shutters in 2011 according to German association BSW. This is despite global solar demand in 2011 increasing by around 30-40% compared to 2010. The reason is that massive overcapacity has been created in China and other parts of Asia. Backed by cheap loans and massive subsidies, around 50 GW of solar panel capacity has been created . This has led to a crashing of solar panel prices by 60% which has decimated the higher cost companies in Europe.
January 19, 2012
South Asia is becoming a hotbed for possible army coups as democratic governments in Pakistan and Bangladesh foil attempts by the army to topple the government. Note both countries have seen long tenures of army ruling them with civilian leaders assassinated or sent to exile. India though remains solidly democratic with the armed forces subservient to the government in both law and fact.
January 19, 2012
The Indian government is not going to impose any new duties on imports of Chinese solar cells. This is despite the petition by the Indian solar panel manufacturers to give a level playing field. Note Chinese solar panels have virtually destroyed the solar manufacturing industry in the West with big companies falling under the relentless price pressure where solar panel prices have gone down by 60% in one year. Only the Koreans seem to be standing up to the Chinese government backed top tier solar companies from China. The rest have mostly folded up and are facing survival questions including those from Taiwan. Indian solar companies were never that big and cost competitive anyway given the headstart and support of the Chinese backed companies. The price crash in 2011 has seen most of them close their factories as they can't even cover their costs at the Gross Margin Level.
January 19, 2012
There is urgent need to reduce the solar capacity addition in Germany because
a) It is requiring almost half of the $21 billion renewable energy subsidies in 2011 while generating 3% of the total power
b) Too much solar power while put pressure on the power grid as at the peak afternoon hours solar can generate almost 10% of Germany's power requirement which means shutting down other sources
c) German Solar Panel producers have stopped benefiting from German domestic growth. Most solar companies in Germany have been decimated by Chinese competition and around 20000 solar jobs and 5000 companies have shut down.
January 19, 2012
The company is planning to introduce a big bang plan for broadband coupling a cheap tablet with a cheap monthly plan. This is on the lines of a mobile phone with a monthly connection. Reliance has a good chance of winning the broadband market which remains under penetretad and high cost. It poses a direct existential threat to India's telecom companies which have failed to compete on data effectively.
Reliance in continuation of its strategy in the media industry has bought a small stake in Den Networks one of India's largest cable networks though one its subsidiaries. The company is slowly and methodically capturing the entire media development and delivery network in the country. The stake in the cable companies will give it leverage to deliver its broadband and content.
January 18, 2012
Solar Insolvency Protection is a new financial product that is going to be introduced by Munich Re the giant German reinsurer. Note Munich Re has been at the forefront of introducing insurance products for solar energy. It was one of the first companies to provide an insurance against the 25 year solar warranty which is generally given by solar companies for their solar modules.It has introduced it for LDK Solar Panels before moving onto other companies as well.
January 18, 2012
More Hedge Fund Employees were arrested by the FBI on Insider Trading Charges . Note Raj Rajaratnam the high profile hedge fund manager of the technology hedge fund is already cooling his heels in jail after being convicted of insider trading by paying money to company and insiders for illegal information. A number of low rung employees have also been jailed for lesser terms. His friend Rajat Gupta who was a former Mckinsey chairman is also facing charges which may result in conviction for passing confidential information to Rajaratnam.
January 18, 2012
First Solar the Big Daddy of Thin FIlm Solar Panels too is under pressure and if not for the DOE funded solar farms in California would have been facing a huge global marketshare loss. There are only a few thin film companies that can hope to compete . Those that can have big parents with massive balance sheets like Solar Frontier backed by Showa and Shell, Sharp ,TSMC and others . VC and PE backed startups have a snowball chance in hell of surviving because they need to get their costs to 50c/watt an impossibility even for First Solar leave alone poor startups.
January 18, 2012
Wind Power in India has been wildly successful and is the 5th biggest in the world because of substantial incentives from the government. One of them has been accelerated depreciation which has made hundreds of companies and rich individuals buy small wind farms. This helps them offset their tax liabilities providing a substantial 2 digit returns. However the big drawback in this from of green subsidy is that it does not incentivize the production of wind energy. Once the wind farm is set up, the incentive to produce lots of electricity is not there unlike the case of Feed in Tariff where your returns are solely based on the electricity generation.
January 16, 2012
Germany has seen the biggest increase in solar installations in the history of solar energy with 3 GW in the month of December 2011 alone. For perspective this is almost equal to the installed capacity of the Chinese solar energy which has almost 6-7 times as much electricity generating capacity . The returns are still high in 2012 with existing FIT , so the German government may have to plan additional cuts with plans of
a) cut of 2% FIT every month in 2012 to slow down the installations and bring down the solar system IRR
b) a cap on feed in tariffs to solar systems of 3 kilowatts only .This will prevent larger solar installations and building of large solar farms
January 16, 2012
China add the most electricity capacity annually in the world at around 100 GW and its total electricity generation capacity is second only to the USA which it will surpass in the next few years. China is highly dependent on thermal power for its energy needs which is becoming scarce and expensive by the day. Not to speak of the big disadvantages of coal as a fuel which causes thousands of deaths each year. Solar Energy has now reached grid parity in many parts of the world thanks to the low cost cheap solar panels being made by Chinese solar panel producers. With many countries now thinking of putting an anti dumping duty on Chiense solar modules, the government is looking to boost domestic demand . Chinese solar panel Tier 1 players like LDK, Suntech, Trina and Yingli besides some others are the biggest beneficiaries of this new solar policy from China.
January 16, 2012
SMA Solar ,the biggest German Solar Energy company is now losing marketshare to the new solar inverter manufacturers in USA and China. Note SMA Solar held a dominating 40% solar inverter global marketshare in 2010 compared to the solar panel manufacturers none of which has managed more than a 10% marketshare . SMA Solar however is now feeling the heat of the competition as solar energy prices continue to go down steadily. The pressure on the solar inverter companies has been increasing as solar inverter prices as a percentage of the total solar system cost has risen from 5% to almost 10% now as solar panel prices have come down much more rapidly.
January 14, 2012
How Chinese Module Makers will use the Taiwanese Cell Producers to Circumvent US Anti-Dumping Policy
The USA and China are locked in a bitter tiff over solar panel imports from China. Note Solarworld filed a petition with the ITC which in all probability will put an anti-dumping duty on Chinese solar modules. Other countries whose solar panel producers have been swamped by the super cheap Solar Panel imports too are thinking of special custom duties. However the big Tier 1 Chinese solar panel makers are not sitting idle . They have already come out with strategies to circumvent the US Solar Panel Duties if they are imposed .
January 14, 2012
China has reported the first decrease in its forex reserves in a qtr since the 1998 crisis. The Chinese Foreign Exchange Reserves which are humongous at over $4 trillion has shown a $100 billion decrease in Nov and Dec 2012 .While the sharp decrease in the Euro may account for some change , there is also anecdotal evidence that the hot money is flowing out of China . Note earlier Hot Money was pouring into China given the potential of yuan appreciation but with the potential of a Chinese Hard Landing ,the opposite may be happening . China has a distorted economy heavily dependent on exports and investment for growth . However changed macro economic conditions make this model unsustainable . How China manages to transition out of this investment export fueled condition is an open question . That they must is in no doubt nor the fact that China's 10% GDP growth days are definitely over.
January 14, 2012
Australia & New Zealand Banking Group , is going to cut 900 jobs are the Australian real estate market slumps. Financial Jobs are facing a carnage with banks cutting down left , right and centre .ANZ which is one of the 4 largest banks in Australia joins its couterparts around the world in sharply cutting banker jobs as the global slowdown bits the financial industry. Note the outlook in the Financial Industry is that of a Depression even as the world economy faces some hiccups from the European Debt Crisis . Real Estate Markets have been distorted globally by bad regulation , low interest rates etc. While China is seeing the first signs of a troubled real estate market, USA has been feeling the effects since the last 3-4 years. Australia has also joined in with the popping of the real estate bubble. Alongwith construction and real estate companies , financial companies who make the real estate mortgages are the worst hit in general.
January 14, 2012
The Indian Solar Power has been one bright spot in the gloomy infrastructure and engineering sectors in 2011. With share prices crashing with growing corruption, land acquisition and financing problems, Solar Energy has surged in India thanks to government support and subsidies . While a number of Green Technology companies have started up to capitalize on the growing renewable energy trend, the established constuction companies in India have not been far behind . While utilities like Tata Power, Adani, Reliance Power, NTPC have already built or are setting up power plants based on solar panels , L&T has become a major solar EPC players . L&T is now raising debt with a $100 million issue to fund its solar expansion plans .
January 12, 2012
The Indian government is going to set targets for large power users so that their energy usage is capped. The Bureau of Energy Efficiency (BEE) is going to supervise this program in which Energy Saving Certificates will be awarded . This certificates can be traded on the energy exchanges providing an incentive for large energy users to improve energy efficiency . Note Renewable Energy Certificates (REC) are already trading successfully on IEX since the last year . REC have promoted the usage of Renewable Energy by providing a market linked mechanism to find prices for green energy in India.
January 12, 2012
The Financial Industry will shed another 150,000 jobs according to Richard Bove, an analyst at Rochdale Securities LLC . Royal Bank of Scotland the bankrupt UK bank that was taken over the British government is going to kill a number of investment banking divisions and will fire 3500 people. RBS has already fired thousand before in wholesale and corporate banking . Now RBS will completely exit from a number of divisions like M&A, Cash Equities etc. which will mean thousands of firings . In an environment when financial jobs are scarce , this means that the fired thousands will have a tough time getting into the workforce again.RBS is going to fire 3500 people in addition to 2000 already announced. This would bring down the 24,000 pre crisis headcount by almost 45% .
January 12, 2012
The number of solar factories closing in Europe has increased tremendously in the 2nd half of 2012 despite a record surge in Germany which would have raised 2011 solar growth to 25%. However the relentless price pressure from Chinese solar panel companies has decimated the solar companies in the West. While there have been a number of famous cases of bankruptcy like Solyndra and Solon, there have been bigger solar factory closedowns. REC has closed down more than 1 GW of wafer capacity while a pure play Spanish solar wafer factory also closed down recently . British solar wafer maker PV Crystalox is also near the verge of failure. Solar Wafer prices have fallen by almost 60% in the last 1 year with the prices much below the cost of production in Europe. It seems unlikely that any solar wafer maker will remain alive in Europe by 2013.
January 11, 2012
Popular Indian mainstream media organizations are spreading a report by Barclays that links the building of tall skyscrapers in India and China to an imminent crash in the economies of both . Note China has been building skyscrapers for a long time and the real estate downfall has already started . India is barely building 4-5 skyscrapers none will be the highest , so the Indian theory is even more specious. However the content scraping mainstream media outlets continue to propagate the story to the top of the news