The Survival Podcast Forum

Finance and Economics => The Money Board => Investing and Saving => Topic started by: misterdaycare on October 17, 2008, 10:01:27 AM

Title: Investing In Solar (Re: 2009 Solar Incentives)
Post by: misterdaycare on October 17, 2008, 10:01:27 AM
Would anyone care to speculate as to what would be a good energy investment company or fund to invest in?  This 2009 solar credit incentive sounds like there could be money to be made somewhere.  PBW PowerShares WilderHill Clean Energy Portfolio AMEX seems to be going up and up all of a sudden (after I sold my shares for GLD SPDR Gold Shares NYSE ARCA a two weeks ago which is now going down and down). 

Any ideas would be appreciated. 
Title: Re: Investing In Solar (Re: 2009 Solar Incentives)
Post by: Stein on October 17, 2008, 10:42:50 AM
I just got back from the tradeshow Solar Power 2008 which is the biggest show in the US.  I attended several seminars as well as talked with tons of manufacturers, installers and power producers (small scale unregulated utilities).

The first thing to keep in mind is that there is virtually zero natural demand for solar.  The only substantial demand comes from government incentives and subsidies.  Even with massive subsidy, it is tough to make a buck with solar right now.  True, people want to become less dependent on the system and fossil fuels, but you cannot drive a multibillion dollar industry with a few homeowners.

Payback periods are often 15-20 years and some of the equipment (inverters in particular) cannot be expected to last much longer than that.  Residential systems are very expensive, often $30k or more and HELOC/2nd financing is or has dried up.

From the commercial side, other forms such as wind are still substantially less expensive and reliable in most cases.  With commercial solar, over 50% of the cost of a system is installation since there is no commercial sized products.  A 1 MW installation will have over 4 million parts that need to be assembled by a person out in the desert with massive amounts of interconnecting wiring.  With wind, you can buy a 2-3 MW turbine and assemble it with a fraction of the labor and a fraction of the connections and wiring.

If I was to look into putting money into something solar, I would look into PPA companies.  Power Purchase Agreements are unique to the solar industry.  Say Walmart in your town has a big roof and is interested in solar power but doesn't want to take on the responsibility of installation, maintenance, system design or the high price tag for the initial purchase.

A PPA company would contract with Walmart and the PPA company would design, purchase, install and operate the solar system and Walmart would pay a negotiated rate for the electricity generated for 20 years.  The long term commitment enables the PPA company to get good financing and their volume allows for substantial discounts on equipment.

Most PPAs are run as venture capital firms, but you may be able to find one that allows for small investing.

Outside of that, the market is still not established.  Jack discussed how prices will come down, but it won't happen with current technology.  There are floors on the cost due to the intense manufacturing required and you won't see current mono, poly or thin film cells with paybacks of 5 years like you can get with solar water heat.

If the incentives go away or go down, the industry will belly-flop.  They have eight years at the federal level, but state incentives are just as important in many cases.

I am waiting for an order of magnitude improvement in the technology or manufacturing process.  Either they have to boost efficiency 2-3 times (200-300%) or come up with technology that is 2-3 times less expensive to prouduce.  Right now, most manufacturs are giddy with boosting efficiency 1%.
Title: Re: Investing In Solar (Re: 2009 Solar Incentives)
Post by: misterdaycare on October 17, 2008, 09:25:18 PM
A very in depth and informative response.  Thank you.