I really like this article because it shows everything I’ve been discussing for quite some time now… This is a top performing clean energy portfolio; however, the fund managers really press the boundaries of clean… and for a good reason. The nuclear and natural gas stocks here are the top performing stocks. Wind is at the very bottom, followed by solar. Maybe we should set aside our ostracizing sense of environmentalism and give a little more leeway, because the best forms of clean energy at the moment are being vilified for relatively small issues. Check out the film “Pandora’s Promise” for more information on the unfair vilification of the nuclear energy industry.
–Overall outlook: the state of solar power in 2015 is mixed by particular company and varies heavily by location; however, the overall trend is solid and continues upward in terms of growth. Growth will not be nearly as fast as other industries like oil or natural gas, but installations are rising every year at a steady pace. Companies are merging and vertically integrating. The main players in the utility market are companies like SunEdison and SunPower, while companies such as SolarCity, Sunrun, and Vivint are dominating the residential market.
–Correlation with oil prices?: It must be pointed out that solar fundamentals do not show correlation with oil prices, and in fact show slight signs of negative correlation with oil prices.
–On-par with natural gas prices!: Utility-scale PPA prices decline steadily with natural gas prices and this trend has been occurring for about 5 years. Solar prices were around $190/MWh in 2009 and a NGA contract was around $175/MWh. In 2014 a solar PPA was around $50/MWh and a NGA contract was around that same area; however, much more volatile.
–Raw material costs dropping!: Average global multicrystalline solar module prices in ($/watt) were around $1.30 in 2011 and as of the beginning of 2015 were around $.70.
–Specific growth markets: Growth markets include: the Americas, India, Latin America, and South America, while China and Japan are large, but not growing. Solar has succeeded in places like India due to relatively unpaved electricity access coupled with an extremely high amount of sunlight (shorter payback period) and an eager government that actively spots opportunities for solar development.
–Microfinance in poorer nations: While average incomes in India are quite low, the government has set up microfinancing solutions that allow entire villages to pay for solar installations. While ordinary lending institutions wouldn’t be willing to lend out to poor farmers with no history of credit, microfinance creates scenarios where payback is possible although not terribly profitable. However, once installations occur, farmers benefit from and are thankful for tremendously improved productivity. Solar water pump installations, for instance, allow farmers to extract water without the hassle of dealing with costly diesel pumps that require constant fill-ups.
–Where solar is NOT doing well: Solar isn’t doing well in areas with low levels of sunlight and/or governments that don’t support policies like net metering. Places like Arizona have tons of sunlight but energy prices are also relatively cheap there due to a large number of coal, natural gas, and nuclear power plants. Additionally, the government in Arizona is not very supportive of solar energy installations, with very few incentives to help solar companies succeed. Places like Germany are bad for solar, but the government there has dumped tremendous amounts of money into subsidizing the technology.
–Kick start is often necessary: Solar markets blossom when energy policies create incentives for installation. Due to the fact that solar requires time to pay off, PPA’s are often preferred and net metering has to be set up in some proportion in order to manage the flow of solar during the daytime and fuel source energy in the nighttime. Rebates are not necessary for profit on solar systems; however, they do generate momentum due to the fact that solar is, and continues to be an ALTERNATIVE energy source run against mainstay utility companies. Because consumers are not forced to take roof-top solar power, rebates help kickstart the industry and have also helped to speed up the drop in costs across the supply chain.