Solar profits left unattended

Solar profits

Written by Brian Hicks
Posted October 12, 2005

Dear Wealth Daily reader:

Attending a press conference with Senator Lamar Alexander (chairman of the subcommittee on Energy) and three of the most powerful CEOs in the solar game last week, I realized one thing as I looked around the room.

There will never be a better opportunity for us to stake our claim to the solar market!!!

With only eight journalists meticulously taking notes while the gatekeepers of this industry were offering up some of the most exclusive intelligence on the future of solar - it was clear that the mainstream media is still clueless as to just how lucrative this market is.

The room was practically empty!

But that's okay. Because while the mainstream media sleeps on what could easily be one of the most profitable markets of the 21st Century, the front-runners of the solar industry will continue to coast below the radar - giving us an opportunity to grab shares at a significant discount before those tax credits kick in next year.

Though it's still quite amazing to me that more investors haven't staked their claim to this market yet.

Just the global photovoltaic market alone has averaged a 40% growth rate since 2001. And photovoltaic production this year should reach 1.5 gigawatts - double its level in 2003, representing approximately $11 billion in revenue.

That doesn't even take into account the demand for Solar Thermal Devices and Concentrating Solar Power either.

Now while a 30 percent investment tax credit (ITC) was included in this summer's federal energy bill, it's only for two years.

However, during the press conference on Friday, Senator Alexander indicated that he would soon introduce new legislation to increase the tax credit for six years.

And since those on Capital Hill aren't going to want to vote against a tax credit this close to congressional elections, the outlook for an increased ITC commitment is hopeful.

Nonetheless, the solar industry has been growing by leaps and bounds over the last five years. And even if the tax credit is not extended, the high cost of oil and natural gas, coupled with the momentum that has already taken hold with the first phase of ITCs, fares quite well for the industry as a whole.

Within the next few weeks, I'll be recommending two new solar companies to the Green Chip Stocks portfolio. (Our first two solar plays are both up, 36.6% and 20.3%)

Both of these companies are due for a big payoff over the next two and a half years - and even more if those ITCs get extended, as these are two of the most underrated and overlooked companies in the industry. For now, anyway.

Both have maintained a valid history of consistent sales and revenue growth over the last three to five years, have outperformed many of their competitors in terms of technological advances and design without breaking the bank on research and development and both maintain a sizeable share of the European and Asian markets. Two markets that, due in large part to Germany and Japan, are integral to the stability and continued growth of any solar company.

Dispelling the myths, taking the money

Whether through years of misinformation or just lack of credible information available to the masses, the solar industry has had to deal with an inaccurate image of inefficiency and claims of unaffordable technology for years.

Though now that the world is down to its last 30 years of oil, that image is finally changing.

Sure, there are still those investors who refuse to accept solar energy as a real and viable source of cheap, clean and efficient energy. And that's fine.

But while they're looking for new typewriter ribbon companies to invest in, the smart money is diversifying with solar.

And the reason is simple...

In the renewable energies industry, solar is king.

Don't get me wrong. There's still plenty of money to be made in geothermal, biomass, wind, marine energy, etc.

The Green Chip Stocks portfolio is proof of that.

In fact, just last month one of our geothermal plays hit a new record high.

But despite that, solar has still taken the lead in the race for renewable energy dominance.

And the annual growth rates of solar markets, both here in the U.S. and globally, coupled with the money investors are making in this industry right now validates this claim.

Of course, some are still hesitant about investing in solar companies due to a wave of skepticism that has been brought about by nothing more than flawed data and, to put it simply, "myths."

So before we get any deeper into this industry, and before we move onto any new solar recommendations, let me take this opportunity to clear up a few things about solar energy.

First of all, solar is not too expensive for widespread usage.

Driven by steady increases in sales volume and continuously-improving research and development, solar photovoltaic technology has declined in price every single year since first being introduced to the market.

In fact, compared to nonrenewable energy sources, which become harder to find and more expensive with every ton burned...every solar panel purchased makes the next one even cheaper.

Secondly, solar manufacturing does not result in more pollution than is saved by solar usage.

Any pollutants produced in the manufacturing process of a photovoltaic system are minimal at best. In fact, a photovoltaic system meeting half of the electrical needs of a typical household would eliminate nearly half a ton of sulfur dioxide pollution from the air.

The manufacturing of photovoltaic devices is very similar to that of the manufacturing of window glass. And the process used to render it electrically reactive is the same used in the manufacturing of microchips…which is considered a clean process by many states and municipalities.

And concentrating solar power devices and solar thermal devices are really nothing more than specialized formations of steel, aluminum and glass. Much like you would find in household windows, water heaters and mirrors.

Another common myth is that solar only works in bright, warm climates.

Not true!

Photovoltaics and solar thermal do not require heat. They are only dependent upon light. And this light doesn't necessarily need to be direct for the system to work. In fact, the entire United States has adequate solar resources.

And one of the most common myths I hear almost every week is that solar devices require more energy to manufacture than they produce throughout the life of the system.

Again, nothing could be further from the truth.

The National Renewable Energy Laboratory has conclusively demonstrated that over its lifetime, a photovoltaic system will produce more energy than it consumes. In fact, energy payback for photovoltaics is only between two to four years.

('Energy payback' refers to how long a photovoltaic system must operate to recover the energy and associated generation of pollution and CO2 that went into making the system to begin with.)

So here's the good news...

The solar business is booming.

The bad news - the solar business is booming!

That seemed to be a common sentiment shared by most at the solar conference last week. And it's true.

Business is booming.

Demand is at an all-time high.

So what's the problem?


Silicon, to be exact.

Silicon, which is used to manufacture solar cells, is in short supply.

Solar manufacturers are scrambling to find the stuff so they can keep up with the influx of orders.

And once the solar ITCs kick in, that demand is only going to get bigger!

Of course, we're also talking about an industry that's seen unbelievable highs and rock-bottom lows over the past 25 years.

So with so much at stake this time around, industry leaders aren't leaving anything to chance.

While the silicon shortage has certainly put added pressure on solar manufacturers, it has also spurred new innovations that could actually end up contributing to the furthering of the technology - making it even more efficient and cost-effective.

Next week I'll tell you more about these innovations...and how some companies will actually end up profiting from the silicon shortage.

Until then...

Jeff Siegel
Editor, Green Chip Stocks

PS. Don’t wait another second. Natural gas supplies are tighter than Joan Rivers’ face. And since 55% of US homes heat with natural gas, the government is warning Americans that their heating bills will increase “48% this winter” alone.

As a result, renewable energy is the hot topic in the market. Last week, I attended a solar energy conference in D.C. The joint was jammed packed with over 1,300 people from all over the world.

I’m told it was double the amount of attendees from last year. If that’s any indication, solar energy – and renewables in general – are going to skyrocket.

My Green Chip portfolio is also going gangbusters, up 32.7% for the year. And my #1 organic food stock is up 160% in the past 2 months alone!

Compare that with the Dow and S&P 500, which is down 5% and 2.2% respectively.

To learn more about my exploding portfolio, visit: [The Most Contraversial CEO in America]