It just keeps getting better!

Written by Brian Hicks
Posted March 15, 2006

Dear Wealth Daily Reader,

Before we dive into today's Green Chip Review, I have to share this with you.

This morning I got another press release from Evergreen Solar (ESLR:Nasdaq). I swear these guys send me more press releases than practically any other company I follow. And the thing is - it's always good news!

This morning's press release was no different.

Turns out, the company just entered into another multi-year supply contract for its photovoltaic (PV) modules. This latest one with German-based, Donauer Solartechnik, is worth about $125 million.

This is Evergreen's fourth major contract in the past four months!!!

The total value of these contracts is now worth more than $380 million.

It's no wonder we've been making a killing on this one.

Take a look at Evergreen's chart:

We're all well aware that solar is hot right now. But just because a company has the word 'solar' in its name, doesn't mean it's going to make you any money.

In fact, over the next couple of years, we're going to see a real Darwinian momentum kick in. So if you're trying to get a piece of this lucrative market, you have to understand what's going to separate the duds from the blockbusters.

Today, it's all about materials. Or more specifically - silicon.

Silicon is a material that's used to manufacture solar cells. Unfortunately, it's also in short supply.

You see, companies that provide silicon to the solar industry can barely meet demand as it is. Therefore, some solar companies trying to fulfill orders are falling short because they don't have enough of a key production component - silicon.

The fact is, solar manufacturers are scrambling to find the stuff. And experts predict this shortage will last at least another two years.

But it's this very shortage that has led to Evergreen Solar taking a bigger chunk of the market. And here's why...

The company utilizes a patented 'string-ribbon' process to produce its PV. This process yields over twice as many solar cells per pound of silicon as conventional methods.

On top of that, the company announced a partnership with Renewable Energy Corporation last November which gives Evergreen access to a long-term supply of solar-grade silicon.

Renewable Energy Corporation is the largest manufacturer of solar-grade silicon.

So here's this solar company with access to a wealth of silicon, yet uses about 50% less silicon than conventional manufacturers.

At least while the silicon shortage remains, this company will continue to deliver.

If you'd like to read more about Evergreen Solar, as well as the other solar companies that hold the most potential for investors, join my free Green Chip Review Daily Updates here.

Now, on with today's Green Chip Review.

It's not the heat, it's the humidity!

Walking through the streets of Baltimore on a hot July afternoon was once described by a local writer as the equivalent to ice skating on the parched tongue of a homeless prostitute. I'm not sure how one comes to that kind of comparison - though I can't imagine it's far from accurate.

Generally, the good people of Baltimore will tell you the predictable, "it's not the heat, it's the humidity." Call it what you want - it's still brutal and unforgiving.

You see, when I was a kid, we didn't have air condition. Though my mother did an excellent job of strategically placing those cracked and shaky plastic box fans all over the house. Yes, there's nothing more euphoric than hot sticky air being blown in your face while you curse the heat and reminisce over last winter's snowfall.

And there's no better way to start your day then walking out of a cold shower, only to be dripping with sweat before you even get a chance to throw on your drawers.

Of course, nowadays we have the luxury of energy-sucking air conditioners that can pump out arctic air faster and harder than Mother Nature herself.

This has certainly enabled many citizens of Baltimore to function properly while the mercury dances on the 100 degree mark and the stench of the bacteria frappe we call the Harbor permeates throughout the entire city like an 800-pound skunk with irritable bowel syndrome.

Thus, even on those occasional 85 degree summer days, the windows still stay shut, the air-conditioning stays on - and the odor stays out.

Certainly we have become a culture overtaken by modern conveniences that have led us to borderline, gluttonous behavior.

Think about it for a second.

How many times have you walked into a restaurant in the middle of summer, only to find that the temperature inside is about 40 degrees less than outside. It's summer! Do I really need to bring a jacket with me just to get a bite to eat?!!

And I can't tell you how many of my friends have their air conditioners jacked up during the afternoon - during peak energy times, while they're not even there. They're at work!!!

Well my friends, the days of gluttony may soon be coming to an end here in Charm City.

What's that smell? Panic perhaps?!!

Back in 1999, Maryland deregulated its electricity industry, and Baltimore Gas and Electric Company's rates were frozen for the following six years.

Of course, in recent years, the cost of natural gas, coal and other fuels used to make electricity have soared. And with BG&E's rate caps due to expire in July, the company will now have to pay more to buy the electricity it delivers. As a result, electricity bills in Maryland are expected to jump 72 percent!!!

Yes, you read that correctly. 72 percent!!!

You see, for years, Maryland residents have been paying a lot less for their electricity than most states.

In 2005, the Federal Energy Information Administration estimated that Maryland residents paid an average of 8.23 cents per kilowatt hour. That was less than the average of 12.30 cents for Mid-Atlantic customers in New York, New Jersey and Pennsylvania, and 8.60 cents in the South Atlantic regions.

Regardless, Maryland residents are now seeing red and pointing their fingers at BG&E while demanding lawmakers take action.

Well, they can point all they want - but it's not BG&E's fault that the state is strapped for cheap energy. And despite it being an election year, there's very little lawmakers can do.

Over the past couple of weeks, Maryland's finest have introduced a flurry of legislation that would ease the economic burden for consumers.

One bill suggests extending the current freeze until fall, 2007. Another suggests cap increases in power rates at 20 percent per year and allowing any increases in excess of that to be spread out over four to five years. And the most recent involves a plan to limit electricity rate increases to 15 percent this summer with the remainder of the rise phased in over three years.

Of course, the state can't require utilities to sell power for less than their costs either. BG&E is not going to operate at a loss. And unless the state can offer some kind of compensation - it's hard to see how BG&E will budge.

Some legislators have suggested recouping the $528 million that customers paid to the utility in the past few years to compensate for an anticipated loss in the value of its power plants (stranded costs) - which never actually materialized after energy prices skyrocketed.

But BG&E has been quick to counter that argument by stating the utility has invested more than $1 billion on its infrastructure in recent years, and that the 'stranded costs' concept has been thoroughly examined in the courts.

Now despite the fact that energy plants didn't become uncompetitive at all, but rather soared in value, Constellation Energy Group (BG&E's parent company) made out pretty well on this deal.

Take a look at Calvert Cliffs nuclear plant for instance.

Constellation put this one on its books in 2000 for $1 billion. But last fall, Global Energy Decisions (a consultant that calculates 'blue book' values for generation assets) found Calvert Cliffs to be worth as much as $4.3 billion.

But can you fault a company for taking measures to increase its value?

This is a rhetorical question. I'm not taking sides here.

But the truth is, if this was such a pressing situation (which it clearly is) - why are Maryland residents getting only a four-month lead on an issue that lawmakers have known about since the last election?

Too much time has passed, preparations were not made, and now, the only real bargaining chip that actually has any bite in this whole mess is a legislative threat to hold up the proposed merger between Constellation Energy Group and Florida's FPL Group. Some are hoping this will force BG&E to the bargaining table.

But no matter how you slice it, the fact is, the band-aids on this sinking ship are waterlogged and the rats have already packed their bags.

I wish they all could be California PUCs

It's not that I take pleasure in these types of things.

But you can't help but wonder what this will do for renewable energy momentum here in the Old Line State.

It's no secret that California's solar momentum can easily be connected to the state's fragile energy infrastructure and high electricity costs. In Maryland, neither of these things have ever been a real concern.

But in a few months, that'll all change. Will the Maryland Public Service Commission (which regulates public utilities) act in the same way as the California Public Utilities Commission?

Probably not on such a large scale. But eventually, the finger-pointing and blame games will accomplish everything you would expect - absolutely nothing. Meanwhile, prices will continue to rise.

In an effort to jumpstart renewable momentum in Maryland, it's entirely possible that the Maryland Public Service Commission could pursue new renewable initiatives.

Sure, Maryland Governor Robert Ehrlich put $2.5 million in the Solar Energy Grant Program in this year's budget. And there is a new bill (HB 810) which would create an increased tax credit for those who install PV or solar water heaters. But with such a drastic increase in electricity costs, renewable tax initiatives could also increase substantially in the coming years.

Again...just like we saw in California.

Of course, this still begs the question, will Marylanders seek renewable solutions themselves - like new PV installations or solar water heaters?

So to satisfy my optimistic curiosity, I decided to call one of the local Home Depots to see if they've seen an increase in PV inquiries over the past week. I was told, "No more than usual."

But give it until August - after consumers have to cough up another $500 to $700 for their electricity bills during record-breaking heat waves that many scientists are predicting to smother the northeast this summer.

I predict that unless electricity rates can maintain these low levels, we'll start to see a new fondness for renewables in Maryland.

Until next time...

Jeff Siegel
Managing Editor, Green Chip Stocks