Tomorrow's solar profits today!

Written by Brian Hicks
Posted October 19, 2005

Last week I told you how silicon, which is used to manufacture solar cells for photovoltaic systems (PV), is in short supply.

And as the demand for PV continues to grow, this shortage is only going to get worse.

Fortunately, leaders in the solar industry have been smart enough to pursue alternative PV manufacturing solutions that will soon take the pressure off solar suppliers when it comes to finding enough silicon to keep up with demand.

Because the fact is, in order for the PV industry to maintain, and even exceed its impressive growth rate (40% annually since 2001), it needs to ensure that manufacturing costs don't increase.

And let's be honest. If the solar industry can't tackle high costs now, what's it going to do once those tax credits are gone? Or better yet - will the tax credits even be extended if the solar industry can't prove it's moving forward with the help of those tax credits?

Solar industry leaders know that they will never have a better opportunity to prove the efficiency and cost-effectiveness of solar installations. So don't think for a second that a silicon shortage (estimated to last at least another two years) will detour the companies that are making money hand over fist from the surge in solar demand.

Just one word - Plastics!

Researchers at the University of California, Los Angeles have developed, and are currently testing new polymer cells that could provide a cheap and abundant solution to the silicon shortage.

What is really nothing more than a single layer of plastic tucked between two conductive electrodes, the alternative cell can be mass-produced for far less than conventional silicon cells.

There's also a company called Konarka that has developed a light-activated power plastic which is flexible, lightweight, lower in cost and much more versatile in application than traditional silicon-based solar cells.

Constructed from conducting polymers and nano-engineered materials, this 'power plastic' can be coated or printed onto a surface similar to how photographic film is made.

Now Konarka is not a publicly-traded company. However, this kind of alternative technology does lend integral support to the solar market.

Why else do you think the likes of Siemens and Electricite de France (the world's largest utility, operating a diverse portfolio of more than 120,000 megawatts of generation capacity) have partnered with Konarka?

Silicon Loyalists

Although the silicon shortage has led to innovations in solar cell manufacturing (as proven with the plastic and nano-engineered substitutes), don't count on silicon-based cells to disappear overnight.

While the limited supplies of silicon could lead some of the weaker PV firms to a Darwinian demise - the stronger, more innovative PV companies (using silicon) will continue to dominate throughout the shortage.

These are the companies that either already have the lion's share of the silicon supply or have engineered their technology to use only minimal amounts of silicon - thereby allowing them to maintain their competitive edge.

One company that's certainly profiting from the latter, is Evergreen Solar (ESLR:Nasdaq).

Instead of a conventional silicon-based cell production process, whereby wafers are cut from a large silicon-block (which results in a substantial waste of silicon), Evergreen Solar's patented String Ribbon Manufacturing Technology processes silicon as a high temperature liquid.

In this state, the silicon is able to form a film between two strings that gradually cools and crystallizes.

Ultimately, this process produces a solar wafer with virtually no silicon cutting waste. And as a result, the company is able to manufacture high-quality cells with just two-thirds of the silicon of conventional methods.

Evergreen Solar has also demonstrated technology to produce wafers that are thinner - using just half the silicon of the current production method.

The refined technology yields three times as many PV cells per unit of silicon when compared to conventional methods.

Since January, 2004, Evergreen Solar has been on the rise. Take a look:

And being that the next two years will be plagued with a massive silicon shortage, Evergreen is in an excellent position to exploit this shortage for serious profits.

Painting the future solar

From conserving silicon supplies, to producing cells free of silicon to 'next generation' technologies that almost seem like they should be in a science fiction novel (like photovoltaic material created with nanotechnology that can be spread like plastic wrap or paint), - the future of PV systems and applications will continue to change drastically over the next few decades... giving us an opportunity to profit at every turn.

Mark my words - especially over the next two years, Green Chip investors are going to clean up on Solar. Just as we have all year!

Until next time...

Jeff Siegel
Editor, Green Chip Stocks

P.S. - Before the end of the year, the Green Chip Stocks portfolio will be adding two new solar recommendations. And the timing couldn’t be better!

With recent dips in the market (providing cheaper entry points), we should be able to exploit those record-high heating costs that are right around the corner for a quick boost.

And if the winter proves to be a cold one, maintaining those gains should be a cakewalk.