The Future of Green Tech Investment

green technology investmentAccording to a recent article in Green Technica by author Joshua S. Hill, green tech investment could “skyrocket” by 2030. Hill cites research from Bloomberg New Energy Finance, including a detailed analysis of three different potential scenarios. As their research shows, wind and solar could have the efficiency and popularity needed to bring the renewable energy industry into its own.

Although clean energy ETFs have been underperforming in an era where fossil fuels have largely recovered from recession-era prices, each of the three scenarios explored by Bloomberg New Energy Finance shows an increase in green technology investing. A 230% increase in annual investment by 2030 would mean increasing to a total of $630 billion per year. Bloomberg New Energy Finance largely attributes this to the decreasing cost of wind and solar technologies, as compared to fossil fuel alternatives. The report also shows increased use of hydro power, geothermal and biomass.

Michael Liebreich, Bloomberg New Energy Finance’s chief executive, believes that we have already passed the “tipping point” for clean energy technology. He points out that, even though most news coverage is discussing the future of fossil fuels, costs for green energy and implementation are falling. He says, “The news right now is dominated by stories of pain caused by overcapacity on the supply side of clean energy, and the lure of cheap shale gas, but this is playing out against the falling costs of renewable energy and of all the technologies required to integrate it into our energy system, and falling costs win. What it suggests is that we are beyond the tipping point towards a cleaner energy future.”

The three scenarios explored by Bloomberg New Energy Finance are “New Normal”, “Barrier Busting” and “Traditional Territory”. “New Normal” is cited as the most likely, and ends with a probable $630 billion per year in green tech investing. Each scenario calls for growth in the renewable energy sector, notably in solar and wind energy, along with decreases in fossil fuels. Even the modest “Traditional Territory” scenario shows green tech investment increasing to $470 billion by 2030.

Guy Turner, the head of economics and commodities for Bloomberg New Energy Finance, says that renewable technologies will be the “anchor of new generating capacity additions” in all scenarios. He points out, “The main driver for future growth of the renewable sector over this timeframe is a shift from policy support to falling costs and natural demand.” Read the original article.

When we last looked at solar energy in particular, we noted that 2013 is a slower year for installations due to an oversupply of solar panels. However, by bringing this technology to end-users more quickly and at lowered prices, we explored the idea that solar energy may be closer to being at parity with fossil fuel based energy. Also helping the situation is a budgeted increase in spending for the Department of Energy, including 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.

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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.

Mary Lisanti: Continued Corporate Earnings Growth in 2013 (When the Federal Government Resolves the Budget)

Mary Lisanti is president and portfolio manager of AH Lisanti, an investment management company currently focused on small cap growth companies. She is a 33-year veteran of small cap growth research and investing. For the first 12 years she was a small cap analyst and strategist on Wall Street. During the past 18 years, she has managed small cap portfolios at premier asset management companies. As CIO of ING Investments LLC, (1998-2003) she was responsible for building the active equity management team, and assets under management in her area grew from several hundred million to several billion dollars. Prior to ING, Mary was at Strong Capital Management as Senior Portfolio Manager for both the Small Cap Growth and Mid Cap Growth Strategies and was Managing Director and Head of the Small/Mid Cap team at Bankers Trust Company. Mary was named Fund Manager of the Year in 1996 by Barron’s. She was named #1 small cap analyst in 1989 by Institutional Investor’s All-Star Research Team. In addition, she was ranked #2 and #3 in 1987 and 1986 respectively.

Mary-headshot

I had the pleasure of talking to Mary just before the New Year’s holiday at her office near Rockefeller Center.  We had first met in the late 1980s when she was interested in a technology company that proposed the radical idea of a keyless car ignition or computer security system using a fingerprint.  Interesting how what seemed futuristic now seems almost as old hat as, well, men on the moon.

JA:  How are you feeling about the year ahead?

ML:  Undecided.  I’ll give you some positives and some negatives.  One big positive is that corporate profit growth will still be decent.  Corporations are at very high profit margins, but when you break down what’s going on, there’s no reason they shouldn’t go higher.  Virtualization – the use of cloud computing, and other aspects of today’s high tech should help them cut costs.  For that trend to stop, two things would have to happen: a long period of negative revenue growth, accompanied by fast-rising wages.  Neither of those things is happening.

That will be a positive for the market.  Corporate profits are growing 8-10% and we believe that can continue, and that is widely dispersed across the board.  Small caps can grow even more,we believe, although again there will be wide dispersion in individual results.  This will be a classic stockpicker’s market.

The biggest negative for the market is that we cannot seem to govern ourselves.  That weighs on multiples.  That’s why, four years into this recovery, multiples are still low, particularly when you take into account where interest rates are and how  GDP growth, although below trend, continues to chug along at 2% or so.  In that scenario, logic would have it that multiples would be in the range of 18-19, but they are not.  Why not? I believe it is because of our inability to govern. Politicans are behind the curve;as they usually are, in addressing our structural issues to bring the long term deficit issues under control. Will they address the longterm issues or not?  If they do so now, it will require only modest changes to entitlements and spending. The extent to which we address those issues will affect the performance of the market going forward.

It is psychologically important to multiples: if you can slow the growth in spending at least a bit, you give people more confidence.  In the Clinton years they managed to slow the rate of growth in spending, and Clinton left office with a surplus.  I believe we will spend most of 2013 arguing about entitlements and other budget issues.  Next year it will be the Democrats saying no to entitlement reform, just like this year it was Republicans saying no to taxes.  I don’t know how much it is possible to get done, because it is being done in a fishbowl and from ideological positions that don’t accommodate compromise.

If they do not get something done, I fear that US debt will get downgraded again.

JA:  And would any of the DC politicians feel responsible if that happened?

ML:  I do not believe so, no.  Politicians, in my opinion, are in the business of passing the blame.  If there were another downgrade, it would affect President Obama’s legacy, and I don’t think he wants to be the president who oversaw two debt downgrades in his time in office.  Both sides will have an incentive to compromise and hopefully they will.  The biggest risk to all of us, and to the market, is that the dollar loses a bit of its luster as the currency of last resort.

When you look at Japan and China and Europe, they are getting their act together with regard to being attractive places to invest and could even potentially be attractive as reserve currencies in a few years.  My biggest concern is that we permanently change corporate behavior: if you have a climate of uncertainty for long enough you make people afraid.  Business overall has been clear with Washington that the uncertainty is damaging.  R&D tax credits, farm and agriculture bills, accelerated depreciation – Congress has been handling these as though they were annual issues, and they’re not.  They affect multi-year planning.  When the R&D tax credit was put in place in the early 1980’s, it was in place for 4.5 years.   That would be better—it would give businesses the ability to plan longer term..

These and other things are casualties of this ideological warfare in Washington.

JA:  What do you see as strengths in 2013?

ML:  It is an enormous positive that housing is recovering, and the recovery should continue, assuming Washington does not cut the mortgage deduction..  Unemployment is declining, although it is declining too slowly.  And we have cheap sources of energy.  . A number of industry sources believe that we will be energy independent in the next decade or so, which is a huge positive for our manufacturing competitiveness.

When you look at these things, once we make it through this budget and debt-ceiling problem, things look a lot better.

Governments all over the world have been spending money to fix the problems that caused the recession, and odds are that things will not fall apart again soon.  Over the past several years, we have had a major issue every year that has “terrified” us: last year it was the potential breakup of the Euro and Greek debt default, and this year it was the budget crisis in the U.S. Beyond the budget crisis, I do not see an issue that has the potential to scare investors as much as these two issues have. We should enter a period of more “normalcy,” where macro issues take a backseat to fundamental issues, and that change should allow multiples to increase. But belief in a more stable future will come slowly.

JA:  What should we look for in 2013 when we look at investments?

ML:  As small cap growth investors, we look for earnings growth.  But one of the great positives in this market is that there are many ways to make money in the market.  When I came into the business in the late 1970s, you could make get 7-8% returns several ways.  You could make money with yields –- those companies with no earnings growth offered very high dividend yields, say about 7%; those companies with earnings growth offered more modest dividends, say 2-4% dividends and 4-5% annual growth in earnings.  Growth stocks offered  very little in the way of dividends, but you could get capital appreciation as earnings would increase 10% to 15%.annually. Then, as we moved through the great bull market of the 1980’s and 1990’s, we got to the point where dividends were out of favor and capital appreciation was the only way to make money.. Now dividends are back and once again there are multiple ways to make decent returns in the stock market, depending upon one’s tolerance for risk..That is very, very positive for the equity markets.

JA: How about sectors?  Any of special interest, or any you would avoid?

ML:  There are good companies in every sector.  I would not recommend the utilities, but there are very good opportunities in materials, energy, consumer products and services, industrials and financial services,  In most of these the small caps usually have something unique about the way they do it, or the technology they apply to it.

Tech spending is not forecast to be up much in 2013.  There will be winners and losers.  We need to keep in mind that the corporate world is moving toward Software as a Service, which allows them to stop buying perpetual licenses, and to pay as they use software.  They are going from buying licenses and maintenance contracts, and now are basically paying just for what they use.  Same with cloud computing.  So they are going from spending $20,000 on software and a server to paying $1,000 month.  So even though tech spending is forecast to be close to flat, the companies that will be winners will have SaaS and cloud computing.  These trends will hold down spending.  It’s hard to see how the semiconductor companies are going to prosper in that environment, unless it is the specialty chipmakers who are specialized in populating ever-smaller chips with ever-larger amounts of circuitry for tablets and smart phones – or those companies that are specialized in the ability to manage the signals for those tablets and phones.  But other than those two, I don’t see a lot of growth there.  And I would be careful about traditional license-oriented software companies.  .

JA: What about healthcare companies?

ML:  Interesting.  It’s hard to guess how ObamaCare will play out.  There are some longterm secular trends in healthcare that are worth keeping in mind.  Keep your eye on the value proposition: better, faster, cheaper, more automated.  One of the most interesting areas is the second generation biotechs.  Think about AIDS, for instance.  Over the last 25 years it has become a livable disease – that is, we haven’t cured it, but we can make it possible to live with it, and to do well, not just to survive for a few more months.  Now the industry is working to make cancer livable in the same way; there are whole new classes of drugs that enable people to live with cancer, and not to just be blown away by it in a short time.  Possibly we are spending the same amount of money making cancer livable as we used to, but now we’re spending it over a longer period, and not all at the end of life.  Diabetes monitoring, for instance – the closer we get to continuous glucose monitoring, the better for diagnosis and treatment; One of our investments is Dexcom (DXCM), which has a promising technology for that.  All those big diseases are interesting, and medicine is getting its arms around them too.

JA: How about healthcare IT?

ML:  It has historically been mostly about billing and insurance, but now the future is to move on to quality of care.  Since we have had health insurance as a society, the focus has been on what you might call “industrial metrics,” such as how many patients you can process.  Now the quality of the outcome is more important, and best practices are more important.  There will have to be penalties for readmissions of the same patient.  Mobile apps for monitoring things like blood pressure, glucose, heart problems and blood gases – these things are going to become standard practice over the next 5 to 10 years.

JA:  You mentioned the impact of technology on industry.

ML:  There are lots of new beginnings now, along with outmoding of old things.  Software as a service and the use of the cloud – this is the biggest piece of cost to cut.  If you can cut your IT costs you have overall better margins, and better processes too.  And industrial automation is interesting too.  The first generation of automation concentrated on, for instance, lasers to cut steel.  Now automobiles are being made with lighter materials, so new lasers are needed, lasers to cut nonsteel materials.  Aerospace is an interesting area for this.  Two things that are driving aerospace are new materials that lower weight and cost, and a continuing cutback on oil-based materials.  There is a bit of a renaissance going on in aerospace.

One of our investments is IPG Photonics (IPGP) for the new lasers needed to deal with new lighterweight materials.  Another is Polypore International (PPO), which is making the membranes needed for new electric vehicles like the Chevy Volt and the Nissan Leaf. By the end of 2013, they are expected to be supplying membranes for 24 models of cars.  That goes back to the fact that fuel efficiency standards by 2025 will be at 54.5 mpg.

Another of our investments is Aspen Technology (AZPN), which basically supplies SaaS for factories and plants.  If you are a refinery, for instance, you are required by law to take your systems down every so often for maintenance and test for a number of things such as safety and pollution.  Doing that manually is difficult; it can be done, but it is hard, and if you are global it is harder.  Aspen automates all of that, and they are in a field by themselves basically.

JA:  And energy?

ML:  The shale revolution will be a big job creator, and the move toward natural gas for vehicles is important.  Fleets will be moving to Compressed Natural Gas (CNG), and we believe the infrastructure will be built out for CNG refueling.  Federal Express, UPS and the other big fleets will be the drivers.  We are interested in Westport Innovations (WPRT) for the CNG engines.  And we are watching Clean Energy Fuels Corp (CLNE) for the CNG supply chain, but big oil will be the installer.  We also believe solar will become economical to use, with panels on the roofs, for instance, of warehouses, and power being sold back to the grid when it is not needed.  Between the increased supply of natural gas, shale energy, coal, oil and renewable, we can get to be energy independent.

JA:  How about housing?

ML:  Housing is fascinating.  What happened with housing is what happened with autos.  Now after a period of low sales, we probably need as a nation to do some catching up.  We could need 1.7 million new housing starts for a couple of years.  That would double the current rate.  The Echo-boomers (who used to be called Generation Y) are starting to buy houses; their demand for houses is growing at 5% per year, and will grow at 10% per year soon.  My personal opinion is that this housing cycle will be a long one, similar to what we saw after the housing collapse in the mid 1970’s. In the first few years, we will see a catchup in pricing, but after that we believe housing prices will probably go up a couple of percentage points per year. If they implement the rules on mortgages that are being talked about, the housing market will become a lot steadier and more stable, more like the Texas market, where they tightened the downpayment requirement and favor 30-year-fixed mortgages.  That will be positive for the housing market and for consumer confidence.

There is nothing better for consumers than to have their biggest asset become more valuable every year.  Three years ago if you hadn’t already lost your job, you were still afraid you might lose it.  Your 401(k) and your house were devaluing.  This recovery is more like the late 1970s than the 1990s.  People got burned in the mid-70s and it took a long time to feel better.  When we are operating at full potential, we should have 3-1/2% to 4% GDP growth, and that will come eventually.

JA:  And in 2013?

ML:  I think GDP this year will be 2-1/2% overall because of federal and state problems, but corporate GDP growth will be a good bit better than that, assuming there is a budget deal at some point.  The first half of the year if we watch the government argue about spending, it could be a bit of a damper on growth.  If we regain faith that the politicians will be able to compromise and come up with some answers, the market will go higher.  Having our debt downgraded shook everyone’s confidence.    So the market is at 12-13 times earnings as a result.

If we get a budget deal we could get much stronger investor confidence, but in the short term, our ability to govern ourselves is the big issue.  Once that is resolved, the market will lift.

JA:  Thanks, Mary.

For AH Lisanti:  For financial intermediary use only.  Not for use with investing public.

The information provided should not be considered a recommendation to purchase or sell any particular security.  It should not be assumed that any security transactions, holdings, or sectors discussed were or will be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance discussed herein.  The views expressed reflect those of the portfolio manager as of 12/31/2012.  The portfolio manager’s views are subject to change at any time based on market and other various conditions. The performance reflected herein is not representative of performance of AH Lisanti individually managed accounts or comingled vehicles that AH Lisanti advises.

 

Solar Stock Winners Hard to Find following Tariff News on Chinese Solar Panels

For the U.S.-based solar power industry, the news on May 17 was what many panel manufacturers had been looking for: the U.S. Commerce Department announced it was slapping a high tariff on solar panels from China (http://www.nytimes.com/2012/05/18/business/energy-environment/us-slaps-tariffs-on-chinese-solar-panels.html?ref=business).

While it was certain to “infuriate” Chinese officials, according to the New York Times, just how good the news was for the industry was hard to tell. More importantly for our blog, what does this decision to impose antidumping tariffs of more than 31 percent on solar panels from China mean for solar stocks? Based on the early reactions of the stock market and the fact that the overall market has been hit so hard in recent days, the results are difficult to read.

First, however, some of the fine print. This is a preliminary decision , not set in stone, and it won’t actually go into effect until October, if at all. There is some talk that it would be retroactive to February 2012, however.

Second, solar panel manufacturers based in Taiwan, like AU Optronics Corp., which has become a big player in the thin film solar panel business, won’t be affected. Third, some of the Chinese manufacturers like Trina Solar (which has moved its manufacturing outside of China and won’t be affected) and Yingli announced that their retail prices would not be affected by the tariff. So it will be interesting to watch what the Commerce Department actually does, what it all actually means and how the market reacts.

In the meantime, here are how some randomly chosen solar stocks closed on Friday, May 18, a day after the news broke. If there were real winners, like U.S.-based First Solar and SunPower, it was hard to tell by stock price.  Most of the China-based companies took an initial hit, but then stabilized.

Tempe, AZ-based First Solar (Nasdaq: FSLR, http://www.firstsolar.com), which specializes in thin-film solar modules, continues a drastic slide that began a year ago. Many insiders say their costs are  just too high and margins too low to stop the decline. FSLR, which traded as high as $142 last summer, has fallen all the way down to small cap territory. It closed May 18 at $13.66, down $1.26 for the day. It’s market cap is only $1.2 billion.

Ontario, Canada-based Canadian Solar (Nasdaq: CSIQ, http://www.canadian-solar.com ), which sells a variety of solar products, has seen its stock price stabilize since December. Last summer CSIQ traded for over $12 but by late August it had dropped to about $6.75. It closed May 18 at $2.70, down 25 cents on the day. Market cap is now $117 million.

San Jose, CA-based SunPower Corp. (Nasdaq: SPWR, http://www.sunpowercorp.com) makes a wide variety of solar products and systems. Like the rest of the industry, SPWR stock is now trading near the bottom of its 52-week range ($4.94-$23.36) and its market cap has dropped to $601 million. SPWR closed May 18 at $5.08, down 51 cents on the day.

China-based Suntech Power Holdings (NYSE: STP, http://www.suntech-power.com/), makes photovoltaic products and provides construction services. STP stock tanked on the news, tried to rally back briefly early in the day May 18, but ultimately closed at $2.00, down 13 cents on the day.

China-based LDK Solar Co. (NYSE: LDK, http://www.ldksolar.com/)) manufactures solar products and silicon materials. LDK, which was trading for nearly $5 in late December, closed May 18 at $2.85, down 6 cents on the day. Its 52-week range is $2.54-$7.90 and its market cap is $373 million.

China-based Trina Solar Ltd. (NYSE: TSL, http://www.trinasolar.com/)) designs, manufactures and sells photovoltaic modules worldwide. It has a chart similar to many of the other solar stocks, which reached highs last summer but have been sliding for the most part since. It closed last Aug. 31 at $15.88 and by Dec. 23 it had dropped to $7.39. It closed May 18 at $5.70, down 38 cents on the day. Market cap is now $464 million.

China-based Yingli Green Energy Holding Co. (NYSE: YGE, http://www.yinglisolar.com) makes photovoltaic products including cells, modules and systems. YGE’s 52-week range of $2.75-$9.85 and its market cap is now $396 million. Like most of the other solar stocks, its best days were last summer. It closed May 18 at $2.52, down 28 cents on the day.

Local Smallcap Solar Stocks ‘Light Up’ after Stellar Results from SolarWorld

The stellar results reported by SolarWorld last week acted as a catalyst to “light up” the solar industry sector in Europe, according to the Financial Times (http://www.ft.com/cms/s/0/1bf0834a-32ad-11e0-b323-00144feabdc0.html#axzz1DK6KY7ps). SolarWorld, a silicon wafer manufacturer based in Germany, combined a higher-than-expected profit with a dividend increase that together prompted a 6.7 percent increase in its stock price. SolarWorld stock peaked in early 2009 at nearly €25 but, until now, has been dropping ever since.

After the stellar earnings announcement SolarWorld closed at €8.34 and S&P Equity Research upgraded the stock from a sell to a buy, according to the FT. SMA Solar Technology, the leader in Germany’s solar sector, jumped up 7 percent to €78.10. Germany has long been considered a global leader in the promotion of the solar industry and the country as a whole purchased half of the world’s solar panels in 2010..

It appears that some of the better positioned smallcap solar stocks trading in the U.S. followed the SolarWorld lead. China-based Renesola Ltd. (NYSE: SOL, http://www.renesola.com/) has been on a tear since last week, jumping from $10.58 last Thursday, Feb. 10, to today’s close (Feb. 14) of $11.90, a 13 percent increase in three trading days. Renesola, with a $1 billion market cap, manufactures and sells solar wafers and other solar products.

Ontario-based Canadian Solar (Nasdaq: CSIQ, http://www.canadian-solar.com/), an international designer and seller of solar products with a $647 million market cap, has also enjoyed a good few days. Starting at $13.61 Friday (Feb. 11), the stock closed Monday (Feb. 14) at $15.10.

China-based Solarfun Power Holdings (Nasdaq: SOLF, http://www.solarfun.cn/einfo.htm), which manufactures and sells photovoltaic cells and modules as well as silicon ingots and wafers, among other products, jumped up 3.95 percent Feb. 14 to $9.14. It didn’t hurt that a feature published on Seeking Alpha Feb. 14 picked SOLF as one of five leading solar energy stocks have bottomed out and “already begun long upward trends.”

Marlboro, MA-based Evergreen Solar (Nasdaq: ESLR, http://www.evergreensolar.com/), which makes solar cells, panels and wafers, announced Feb. 14 that it continues its stuggles to restructure its debt. The company announced that it was “disappointed” that bondholders committed to exchange only $45.4 million of the $200 million in debt it had hoped to restructure to “align the company’s capital structure with its evolving business model and better position the company for growth,” according to the  (http://www.bizjournals.com/boston/news/2011/02/14/evergreen-solar-debt-swap-falls-short.html?ana=yfcpc). The stock dropped 5 cents to $2.15, way down from its high of $7.92 it hit a year ago.

1603 Babies: Another Year of Life

The so-called “lame duck” Congress has gotten itself into a productive fit over the last couple of weeks, and passed more important legislation than it had done all year long — much of it bipartisan.  In many ways nothing was more surprising than the action that preserved the “1603 Program” this morning.  Widely reported today, the 1603 Program (so-called because it was created as section 1603 of the American Recovery and Reinvestment Act of 2009 — or ARRA) will be extended by a year, allowing the clean and renewable energy industries to continue to be boosted by a 30% subsidy for qualifying projects.   Proponents of the program claim that it has been responsible for the creation of 100,000 jobs.  Here is a take on the news by Pete Danko of EarthTechling: http://www.earthtechling.com/2010/12/clean-energy-grants-get-another-year/.

Fellsmere FL large-scale Petroalgae R&D facility for algae-based fuels

The Treasury had doled out nearly half a billion dollars this year to solar projects alone: http://www.solarindustrymag.com/e107_plugins/content/content_lt.php?content.6920, and the support was very widespread, with 42 out of 50 states getting at least one grant.  Here is a brief summary from WilmerHale of the provisions of the program and related programs: http://www.wilmerhale.com/publications/whPubsDetail.aspx?publication=9682.

What does this mean for the renewables industry?  According to the American Wind Energy Association, the 1603 Program enabled the construction of 10,000 MW of new wind capacity in 2009, along with 10,000 construction jobs and 2,000 permanent jobs.  The solar industry grew by more than a third in 2009 and may grow by more than 50% in 2010 when the numbers are tallied: http://leadenergy.org/2010/12/the-importance-of-extending-the-1603-treasury-grant-program/.

What does that mean to investors?  Well, to begin with, many of the renewable-energy companies had seen their valuations whacked over the last several weeks as doubt mounted about whether 1603 would be extended.  So there may be some bounce-back profits to be made simply from that.  Look at the giants like First Solar (Nasdaq: FSLR; http://www.firstsolar.com/), whose shares have moved up nearly 10% over the last 2 weeks.  But since the trickle-down effect may not be either as fast or as efficient for the smaller companies and the supply chains, you may have more time to take a position.

Biomass

Biomass companies are definitely included in 1603 — and that includes companies that grow their own biomass (jatropha, algae) as well as companies that use decomposing waste to create fuels.  An article from Popular Mechanics talked about 5 of them: http://www.popularmechanics.com/science/energy/biofuel/4333722.  One of those is South San Francisco-based Solazyme (http://www.solazyme.com/company-profile), but the choice is not wide if you are looking for companies that trade on the stock markets.  The largest is Melbourne, FL-based Petroalgae Inc (EBB: PALG; http://www.petroalgae.com/), with a market cap of over $1.1 billion. 

Solar

 

Solar concentrator looking like a ferris wheel

There are as many solar companies as Arabian Nights in the story book, it seems, divided into those that make the gear (photovoltaic cells, thin film, solar concentrating devices, a myriad of different parts and pieces); those that install the gear, and those that generate electric power from the installations.  There seem to be many claimants for the title “Largest Solar Installation in the World,” but one of the most recent is due to be installed in the eastern Mojave desert near the California city of Blythe: http://www.renewable-energy-news.info/worlds-largest-solar-installation-blythe-ca/.  About 2 months earlier, First Solar announced its own “world’s biggest”: http://solarhbj.com/news/worlds-largest-solar-pv-power-plant-now-operating-in-ontario-canada-0989.  But the “dream team” solar project still has to be the electrification of the Sahara desert, even though it has no hope for 1603 funds: http://inhabitat.com/worlds-largest-solar-project-sahara-desert/

 
 
 
 
 

And pretty-made turbines all in a row (at sea)

Wind

Perhaps the most controversial renewable is one of the oldest: harnessing the wind.  When I was a kid I was taught that waterwheels and windmills were some of civilized man’s first non-combustible attempts to harness natural energy.  But as the applications have gotten bigger, the windmills and waterwheels have become gigantic — and some folks don’t like them one little bit.  The highest-profile new projects tend to be offshore these days, like the huge project planned for the area around Nantucket Island, described here: http://www.capewind.org/.  Wind farms are probably no larger than solar farms, but they stick up really high, and they create what some people see as visual pollution — “that big white thing with the rotating arms is ruining my view.”  Most of the big vendors are BIG, but there are a few smaller makers who might be good places to place a bet.  One is Irvine CA-based Composite Technology Corp (EBB: CPTC; http://www.compositetechcorp.com), founded in 1980, and with a market cap of about $66 million.  CPTC makes wind turbines for the electric utility industry, and so stands to be a fairly direct beneficiary of 1603.   Or there’s Hamburg-based REpower Systems AG (DAX: RPW; http://www.repower.de/), which just last week announced 51 additional MW for the US to be installed in PA, NY, OH and WA.  RPW is a much larger company, with a market cap in the range of 1.1 billion euros, and in the US there is an ADR, RPWSF.PK.

Hydro

Hydroelectric dam (best not to mention fish around them)

If there’s anything more picturesque than an old windmill (think Mykonos), it’s an old waterwheel, and if there’s anything more gargantuan than a big wind farm, it is the modern descendent of the waterwheel, a huge hydroelectric dam.  But if there is anything that is renewable it is mountain streams and the rivers they power, and from the time that Buffalo was electrified by Niagara Falls, the attempt to harness every fast-flowing river has been universal.  And when there are no fast-flowing rivers, we create artificial lakes to run the turbines.  Most big dams are owned or operated by utilities or groups of utilities, and many small dams are under the authority of the Army Corps of Engineers, with a popular estimate that there are 20,000 small dams in the US alone that do not yet generate any electric power. Thus the growing demand for what is called “small hydro” — miniturbines that can generate smaller amounts of electricity but that can also be installed with a minimum of environmental impact and capital expenditure: http://en.wikipedia.org/wiki/Small_hydro.  Earlier this year Russell Ray had a look at the regulatory and funding environment for small hydro: http://www.renewableenergyworld.com/rea/news/article/2010/04/regulating-small-hydro

It’s not easy to find a small hydro smallcap stock, because most of the hydroelectric stocks are big companies like Idacorp (NYSE: IDA) or AECOM Technology Corp (NYSE:ACM).  Smaller utilities in the northeast and northwest can be good places to look, and some very small nonpublic technology companies like Hydroring, a privately held Dutch company with an innovative “fish friendly” small turbine for riverine applications.  Very little data is available on Hydroring, based in The Hague, but there is a website at http://hydroring.nl/.

Storage: the 800-pound gorilla

One of the conundrums of renewables is that although they smile a lot, utilities frequently are not well-disposed toward renewables.  They present a lot of technological and cost problems.  They are frequently remote from the grid and very costly to build long lines to.  Talk to most utilities and you will quickly believe that the key to renewables is a way to store the energy generated until it is needed.  And that means batteries.  Some lithium-ion companies have major smart-grid initiatives underway, but they represent a super-expensive way to store wind-turbine energy.  Regular old lead-acid batteries are a heck of a lot cheaper, but they don’t charge up and charge down fast enough, and they wear out very quickly.  As with other areas of potential 1603 beneficiaries, there are a lot of energy storage companies, so you might look at NYC-based Ener1 Inc (Nasdaq: HEV; http://www.ener1.com/)  , which has a lot of Russian and Japanese lithium-ion technology know-how.  Another option would be Tyngsboro MA-based Beacon Power (Nasdaq: BCON; http://www.beaconpower.com/), which has a flywheel technology.  And the low-cost leader looks to be New Castle PA-based Axion Power International* (EBB: AXPW; http://www.axionpower.com), a company with a battery that is a relative of the lead-acid battery in your car, but turbocharged with nanocarbon to eliminate corrosion and increase the ability to charge/recharge.  It is worth saying that none of the 3 companies has been a mass manufacturer of their products to date, so all require due diligence with regard to their ability to scale up and serve the market.

*client of Allen & Caron, publisher of this blog.

CleanEquityMonaco: A Must-Do for the Greentech Aficionado or Investor March 4-5

One of the high points of the greentech year is coming up March 4-5: CleanEquityMonaco (http://www.cleanequitymonaco.com) in the picturebook-lovely city of Monte Carlo.  Interestingly enough it is not a costly conference to attend, probably because it has very distinguished sponsors, and probably worthwhile even for Americans to fly to.  The conference has arranged very attractive hotel rates, a fraction of what one would expect on the Riviera, and quite reasonable flights can be found from the Northeast to Nice (which is the airport for Monaco as well).

Monaco Harbor from the Old City

CEM is a meetingplace for people with new and significant green technologies of all types, and from all over the globe.  There are several plenary meetings set, and some very distinguished guest speakers as well.  Awards for the best technologies and best commercializations will be made by Sir Stelios Haji-Ioannou and HSH Prince Albert II.  The conference coincides with an annual meeting of the United Nations Environmental Programme (UNEP) and green technocrats from all over the world will be in town at the same time.

But the real show are the new technologies themselves.  The publisher of this blog, Allen & Caron (http://www.allencaron.com) is working with the conference organizers on a pro bono basis, and we have admired the arrangements as they have been made over the last 6-8 months. 

Loopwing Wind Turbine from Japan -- meet them at CEM March 4-5

For obvious reasons, the largest category of new technologies will be in the field of alternative energy: solar, wind, new fuels, etc.  But there will also be environmental technologies that run the gamut.  The sponsor and organizer is London-based Innovator Capital (http://www.innovator-capital.com), a boutique investment bank and financial advisor with a devotion to environmental causes, and there will be investment bankers prowling around looking for clients, as well as technocrats from big multinationals looking for acquisitions and partnerships.  Many of the companies that are showing new technologies are not listed or publicly traded, and quite a few are really post-academic, though all have demonstrated proof of what they claim to be able to accomplish.  All are scrappy, feisty, fearless and have new mind-bending ideas.

Some “hot” publicly listed companies will also be presenting, including Shanghai-based China Energy Recovery, Oak Park MI-based Azure Dynamics, Torrance CA-based Enova Systems, Oxford UK-based Oxford Catalysts, Southboro MA-based Protonex, Cuxhaven Germany-based PNE Wind, Perth Australia-based Enerji Ltd,  and Griesheim Germany-based BGI EcoTech.

Jigar Shah, CEO of The Carbon War Room

The keynote speaker will be Jigar Shah, CEO of The Carbon War Room(http://www.carbonwarroom.com) , a noted authority on renewable energy, and the founder of SunEdison, which has more megawatts of solar energy under management than any other company in the world.  Mr Shah is an alumnus of BP Solar, a DOE contractor on fuel cells and alternative energy, and a member of several boards, including Greenpeace USA and the Prometheus Institute. 

Sir Stelios Haji-Ioannou

Sir Stelios will introduce the Next Wave segment of new technologies on the second day of the conference.  He is best known for having founded EasyJet, a leading lowcost airline that has revolutionized European travel, but he is also the founder of several other companies.  His Stelios Philanthropic Foundation is devoted to environmental sustainability, education and entrepreneurship. 

We highly recommend that you consider attending.  The cost is reasonable and the technology rewards potentially earth-changing.  Some of these concepts will completely reorder the way you see the world.