Warren Buffett’s ‘World’s Largest Solar Power Development’ Underway near LA

It’s being billed as the “world’s largest solar power development,” the joint construction effort started in January by Berkshire Hathaway’s MidAmerican Solar and SunPower Corp. north of downtown Los Angeles in Kern and Los Angeles counties. Officially called the Antelope Valley Solar Projects, the 3,230-acre development in two co-located projects are scheduled to generate 579 megawatts, or enough energy to power 400,000 average California homes or about 2 million people.

MidAmerican Solar is a subsidiary of MidAmerican Energy Holdings Co., which is controlled by Berkshire Hathaway. Warren Buffett is the primary investor, chairman and CEO of Berkshire Hathaway.

The two companies calculate that the electricity powered by the project will displace an estimated 775,000 tons of carbon dioxide annually, which they say is equal to taking about 3 million cars off the road over the next 20 years. MidAmerican  owns the development and SunPower is the designer, engineer and contractor for the construction and will operate and maintain the project. Southern California Edison is the customer that will purchase the power when it is completed by year-end 2015.

One of the other big solar power stories  of the week, “The Incredible Shrinking Cost of Solar Energy “(http://www.juancole.com/2013/05/incredible-shrinking-projects.html notes that thanks to the “dramatic fall in the cost of solar power generation” solar is at grid parity in many parts of the world, including Germany, Portugal, Italy and Spain, as well in the southwestern U.S.

Other data points in these stories include:

  • The cost of the best Chinese solar panels fell in cost by 50 percent between 2009-2012. Over the next two years, cost reductions will “slow” to a 30 percent rate.
  • By 2015 solar panels are expected to fall to 42 cents per watt.
  • U.S. solar installations rose 76 percent in 2012.
  • Hybrid plants that include both solar and wind turbines dramatically increase efficiency and help integrate into the electrical grid.

Given some of the interesting developments in solar power, how have some of the solar stocks fared in the past few months?

San Mateo, CA-based SolarCity Corp. (Nasdaq: SCTY, http://www.solarcity.com/ designs, installs and sells or leases solar energy systems to residential and commercial customers, as well as electric vehicle charging products.  It closed March 15 at $16.74 with a market cap of $406.5 million. By April 12 it was trading at $19.97 with a market cap of $1.5 billion. SCTY closed May 8 at $24.16, up 50 cents for the day with a market cap of $1.8 billion. Its 52-week trading range is $9.20-$28.23.

Ontario, Canada-based Canadian Solar (Nasdaq: CSIQ, http://www.canadian-solar.com/ ), which sells a variety of solar products, closed back on March 15 at $3.50 with a market cap of $151 million. It closed April 12 at $4.07 with a market cap of $176 million. CSIQ closed May 8 at $5.29, down 17 cents for the day, with a market cap of $228 million. Its 52-week trading range is $1.95-$6.09.

San Jose, CA-based SunPower Corp. (Nasdaq: SPWR, http://www.sunpowercorp.com/), which makes a wide variety of solar products and systems and is one of the principals in the Antelope Valley Solar Project, closed back on March 15 at $11.80 with a market cap of $1.4 billion. SPWR closed April 12 at $11.06. It closed May 8 at $15.36, down 6 cents for the day, with a market cap of $1.8 billion. Its 52-week trading range is $3.71-$16.04.

China-based Trina Solar Ltd. (NYSE: TSL, http://www.trinasolar.com/) designs, manufactures and sells photovoltaic modules worldwide. Back on March 15, TSL closed at $4.11 with a market cap of $291 million. It closed April 12 at $4.19 with a  market cap of $335 million. TSL closed May 8 at $4.72, down 22 cents for the day. Its 52-week trading range is now $2.04-$7.67.

China-based Yingli Green Energy Holding Co. (NYSE: YGE, http://www.yinglisolar.com/ makes photovoltaic products including cells, modules and systems. YGE closed back on March 15 at $2.47 with a market cap of $387 million. It closed April 12 at $2.12 with a market cap of $324 million. YGE closed May 8 at $2.20, down 7 cents for the day, with a market cap of $356 million. Its 52-week trading range is $1.25-$3.68.

China-based Suntech Power Holdings (NYSE: STP, http://am.suntech-power.com/), the world’s largest producer of solar panels, closed at $0.70 back on March 15 with a market cap of $127 million. It closed May 8 at $0.51, down 7 cents for the day, with a market cap of $92 million. Its 52-week trading range is $0.30-$2.67.

St. Peters, MO-based MEMC Electronic Materials (NYSE:WFR, http://www.memc.com/) manufactures and sells silicon wafers and photovoltaic materials. Through SunEdison, it’s a developer of solar energy products. It closed March 15 at $4.53 with a market cap of $1 billion. WFR closed April 12 at $4.76 with a market cap of $1 billion. WFR closed May 8 at $5.33, down 6 cents for the day, with a market cap of $1.2 billion. Its 52-week trading range is $1.44-$5.70.

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Obama Budget Proposes Big Increases for Spending on Clean Energy

Photo courtesy of KMBC.com

Photo courtesy of KMBC.com

President Barack Obama’s fiscal year 2014 budget proposal made headlines this week mainly for its changes to Social Security, but the increases proposed in US government support for clean energy spending did not go unnoticed. Reuters News Service called the increases for electric cars, wind power and other green technology “dramatic,” particularly because they arrive in the face of Republican criticism.

While many government agencies get slimmed down in the budget proposal, the Department of Energy would get an 8 percent increase to $28.4 billion next year, Reuters reported. Included are a 75 percent increase in spending on advanced vehicles to $575 million and a 29 percent increase in spending on the ongoing effort to integrate solar and wind power into the national electric grid, Reuters reported. Support for biofuels would increase by 24 percent.

“These increases in funding are significant and a testament to the importance of clean energy and innovation to the country’s economic future,” the Obama administration wrote in the budget proposal, according to the Reuters report.

While Republicans have criticized the US backing of companies like Solyndra, a solar panel maker that went bankrupt, and Fisker Automotive, a hybrid sports care maker which is struggling and laying off employees to hold off bankruptcy, President Obama has maintained that clean energy is a key to the country’s future.

Government support for the clean energy industry “has nearly doubled (the US) energy generation from wind, solar, geothermal and other renewable energy sources” since Obama took office in 2008 and maintaining this level of support “could lead to breakthroughs in the years to come,” Reuters reported.

We’ve been following several wind and solar energy companies, including:

Newbury Park, CA-based Sauer Energy (OTC: SENY, http://www.sauerenergy.com/) is a development stage company developing vertical axis wind turbines for commercial and residential uses. Formerly BCO Hydrocarbon Ltd., the company disposed of its oil and gas interests and in July 2010 purchased Sauer Energy and in May 2012 purchased Helix Wind Corp. Back on Dec. 24 it was trading for $0.24. It closed April 12 at $0.10, down 1 cent for the day. Its market cap is now $9 million and 52-week range is $0.08-$0.39.

China-based China Ming Yang Wind Power Group (NYSE: MY, http://www.mywind.com.cn/) is a wind turbine manufacturer focused on designing, manufacturing, selling and servicing megawatt-class wind turbines. Last July, MY announced it was considering a joint venture with China-based Huaneng Renewables Corp. to develop wind power and solar power projects in China and overseas markets. MY stock closed Dec. 24 at $1.21. It closed April 12 at $1.35, up 1 cent for the day. Its market cap is now $169 million and 52-week trading range is $1.06-$2.47.

Chatsworth, CA-based Capstone Turbine Co. (Nasdaq: CPST, http://www.capstoneturbine.com/) develops and markets microturbine technologies, including technologies used to provide on-site power generation for wind power. It closed Dec. 24 at $0.91 with a market cap of $278 million.CPST closed April 12 at $0.93, down 4 cents for the day. Its market cap is now 282 million and 52-week trading range is $0.73-$1.20.

San Mateo, CA-based SolarCity Corp. (Nasdaq: SCTY, http://www.solarcity.com) designs, installs and sells or leases solar energy systems to residential and commercial customers, as well as electric vehicle charging products.  It closed March 15 at $16.74 with a market cap of $406.5 million. SCTY closed April 12 at $19.97, down 41 cents for the day. Its market cap is now $1.5 billion and 52-week trading range is $9.20-$21.40.

Ontario, Canada-based Canadian Solar (Nasdaq: CSIQ, http://www.canadian-solar.com/ ), which sells a variety of solar products, closed back on March 15 at $3.50 with a market cap of $151 million. It closed April 12 at $4.07, down 3 cents with a market cap of $176 million. Its 52-week trading range is $1.95-$5.15.

San Jose, CA-based SunPower Corp. (Nasdaq: SPWR, http://www.sunpowercorp.com/), which makes a wide variety of solar products and systems, closed back on March 15 at $11.80 with a market cap of $1.4 billion. SPWR closed April 12 at $11.06, up one cent for the day. Its market cap is now $1.8 billion and its 52-week trading range is $3.71-$13.88.

China-based Trina Solar Ltd. (NYSE: TSL, http://www.trinasolar.com/) designs, manufactures and sells photovoltaic modules worldwide. Back on March 15, TSL closed at $4.11 with a market cap of $291 million. It closed April 12 at $4.19, up one cent, with a  market cap of $335 million. Its 52-week trading range is now $2.04-$7.99. 

China-based Yingli Green Energy Holding Co. (NYSE: YGE, http://www.yinglisolar.com/) makes photovoltaic products including cells, modules and systems. YGE closed back on March 15 at $2.47 with a market cap of $387 million. It closed April 12 at $2.12, down 5 cents, with a market cap of $324 million. Its 52-week trading range is $1.25-$4.12.

China-based Suntech Power Holdings (NYSE: STP, http://am.suntech-power.com), the world’s largest producer of solar panels, closed at $0.70 back on March 15 with a market cap of $127 million. It closed April 12 at $ 2012, and then rose to $1.87 in early January, but has been falling since. STP closed March 15 at $0.75, udown 12 cents for the day, with a market cap of $135 million. Its 52-week trading range is $0.30-$2.96.

St. Peters, MO-based MEMC Electronic Materials (NYSE:WFR, http://www.memc.com) manufactures and sells silicon wafers and photovoltaic materials. Through SunEdison, it’s a developer of solar energy products. It closed March 15 at $4.53 with a market cap of $1 billion. WFR closed April 12 at $4.76, down 6 cents, with a market cap of $1 billion. Its 52-week trading range is $1.44-$5.70.

Solar Installations, Farms Catching On with Investors Big and Small

Don’t feel too badly if you are having trouble understanding the ups and downs of the solar industry. Take the Dec. 15 Business section of the Los Angeles Times, for instance. Right above to the headline “Grand Jury Investigating Solyndra,” and yet another story outlining the high-profile bankruptcy of the Fremont, CA solar panel maker despite $535 million in federal aid and $1.1 billion in venture capital backing, was another headline “Record Gains for Solar Industry” and a story noting that “solar power is a booming business in the U.S. ” along with statistics demonstrating the truly staggering growth of solar installations across the U.S. (http://www.latimes.com/business/la-fi-solar-growth-20111215,0,5390004.story).

But then you flip forward a few pages and there’s another report about solar panel maker First Solar, which fell 21.4 percent to $33.45 on Dec. 15, its lowest level in four years, after announcing its second restructuring in six weeks. First Solar, long considered a solar success story and the world’s largest solar company based on market cap (although its market cap has fallen almost 75 percent this year), released an earnings warning Dec. 14 suggesting that “downward pressure on solar panel prices and profit margins will continue ‘indefinitely,” according to the Financial Times.  The company’s basic problem is that there are too many solar panels on the market and countries in Europe, where solar is very popular, are cutting subsidies and will continue to do so.

“If you’re making solar modules, it’s very dicey out there. The prices keep going down, down, down,” said Philip Lawes, chief executive of Laguna Beach, CA-based Insoltech Solar.

But just go back a few weeks and you can read the reports about Google investing millions in solar power, and then there was last week’s news about Warren Buffett getting into the solar business for the first time. MidAmerican Energy Holdings, a unit of Buffett’s Berkshire Hathaway Inc., purchased the Topaz solar farm in California’s San Luis Obispo County from First Solar. Terms were not disclosed but the Wall Street Journal suggested Topaz was worth “more than $2 billion. If you scan the news further, you’ll see that Buffett isn’t the only one jumping into the solar farm business. First Solar and SunPower Corp. have been unloading their solar farms to some of the U.S.’s biggest utilities, including NextEra Energy, NRG Energy and Exelon Corp.

Lawes said the big investors like Buffett see long term income in the large solar farms.

“These solar farms, they aren’t glamorous, they aren’t going to be a home run, but they create a steady cash flow over the long term,” said Lawes, adding that Buffett’s company will enjoy that steady cash flow by selling the energy produced in the farms to a utility. “The utility companies aren’t going anywhere.”

Google and KKR must agree, since they recently announced a joint investment in four solar farms south of Sacramento, CA. The deal allows the solar farm developer and operator, Recurrent Energy, to raise cash and fund future solar farms. Recurrent has a 20-year contract with Sacramento Municipal Utility District to supply electricity to power 13,000 homes, according to a story in the Wall Street Journal.

There’s also opportunities for small investors, Lawes added. Entrepreneurs are approaching owners of commercial buildings offering in some cases to pay 15 cents a square foot for the use of their roofs. The entrepreneurs then install solar and sell the power to utility, just like the big guys with the big farms. “Typically, they just need a flat roof,” he said.

So, other than the big guys like First Solar, how are the smaller solar companies faring? Not that well if you are in the solar panel business.

China-based Suntech Power Holdings (NYSE: STP, http://www.suntech-power.com/), a smallcap that has boosted its market cap up to $423 million market cap in recent weeks, makes photovoltaic products and provides construction services. This stock closed on Oct. 20 at $2.07. By mid-day Dec. 23 it was trading at $2.34.

Ontario, Canada-based Canadian Solar (Nasdaq: CSIQ, http://www.canadian-solar.com/), which sells a variety of solar products, continues to decline. Back in late August it was trading for $6.74. At mid-day Dec. 23 it was trading for $2.85.

China-based LDK Solar Co. (NYSE: LDK, http://www.ldksolar.com/)) manufactures solar products and silicon materials. It, too, has bounced back from lows in late October of around $3. At mid-day Dec. 23 it was trading for $4.91, much closer to the highs of nearly $6 in late August.

China-based Trina Solar Ltd. (NYSE: TSL, http://www.trinasolar.com/)) designs, manufactures and sells photovoltaic modules worldwide. It’s now trading for less than half its Aug. 31 close of $15.88. By Oct. 20 it had declined to $7.15. It’s up from there, but not much. At mid-day Dec. 23 TSL stock was trading for $7.39.

Shanghai-based JA Solar Holdings Co. (Nasdaq: JASO, http://www.jasolar.com) makes solar cells and other solar

 

products and has hit by the downturn. On Aug. 31 its stock closed at $3.66; by Oct. 20 it closed at $2.14; at mid-day Dec. 23 it was trading for $1.39.

With Solar Power’s Future So Bright, Which Solar Stocks Are Oversold?

All the noise about the bankruptcy of privately-held Solyndra, despite the reported $535 million federal loan guarantee, could lead some to think that the solar industry is in trouble. That would, of course, be spectacularly wrong.

While shares in the publicly-traded solar equipment makers have been falling since Aug. 31, the day the bankruptcy was announced, the future of solar power has never been brighter, according to many experts including NRG President and CEO David Crane. He told Jim Cramer on CNBC Sept. 20 that while price of solar panels has dropped “precipitiously…within three to four years, the cost of solar power in at least half of the states in the U.S. will be less than drawing power off the grid.” Crane also added that solar panels represent “a billboard for what you stand for as a business owner. NRG is working with the Washington Redskins to build a 2 megawatt solar installation and solar plug-in stations in the parking lot of their stadium.

As has been noted recently, the problems Solyndra experienced were unique to the company and solar panel equipment makers in general. Basically, its solar panels were too expensive and cost more to install than its competitors. Yahoo News reported that the price for solar panels has dropped by about 42 percent this year alone due to, you guessed it, competition from China.

The problem with picking solar stocks, particularly the solar panel and equipment makers, will be finding which of the group will survive and enjoy the promising future of solar power. Let’s take a look at the stocks of several solar equipment makers and see what they have done since Aug. 31, the day the long anticipated Solyndra bankruptcy became official. They have all fallen sharply, but have they been oversold? If so, which ones?

One of the larger solar companies Tempe, AZ-based First Solar (Nasdaq: FSLR, http://www.firstsolar.com/), the world’s largest maker of thin-film solar modules with a $6.5 billion market cap, hit a four-year low Sept. 22, dropping all the way down to $66.85, then “rallied” on Sept. 23 to $70.24. First Solar’s most immediate problem is apparently its own federal loan program, which is facing new scrutiny due to Solyndra’s problems. FSLR sold for more than $100 as recently as Aug. 31 but has been mostly falling since that day when it lost $1.95 and closed at $99.98.

China-based Suntech Power Holdings (NYSE: STP, http://www.suntech-power.com/), which makes photovoltaic products and provides construction services, was trading for $5.25 on Aug. 31. On Sept. 23 it closed at $2.64, down 7 cents for the day.

Ontario, Canada-based Canadian Solar (Nasdaq: CSIQ, http://www.canadian-solar.com/), which sells a variety of solar products, was trading for $6.74 on Aug. 31. It closed Sept. 23 at $4.72, up 31 cents on the day.

China-based LDK Solar Co. (NYSE: LDK, http://www.ldksolar.com/) manufactures solar products and silicon materials. On Aug. 31 it closed at $5.71 and by the close of market Sept. 23 it had dropped to $3.40, down 7 cents on the day.

China-based Trina Solar Ltd. (NYSE: TSL, http://www.trinasolar.com/) designs, manufactures and sells photovoltaic modules worldwide. Its closing price Aug. 31 was $15.88, while on Sept. 21 it closed at about half that price, or $7.69, up 25 cents.

Shanghai-based JA Solar Holdings Co. (Nasdaq: JASO, http://www.jasolar.com) makes solar cells and other solar products. It closed the trading day Aug. 31 at $3.66. On Sept. 21 it closed at $2.20, up 10 cents on the day.