Solar Energy Darlings

Okay, let’s face it—there’s not a lot of good news on the market. The Lehman Brothers (Symbol: skull and crossbones) fiasco really hurt, and the increase in the Dow today can’t make up for it. Everyone’s hurting, and the question is, where do you put your money now?

Personally, I think the future looks bright for alternative energy, better known as clean energy technology. This is due to a number of reasons. The first is that people are finally ready for a change. With most people nostalgic for the days when gasoline cost $2 a gallon, the rise in cost of natural gas and the incremental increases in the cost of electricity, conventional energy is becoming inconveniently expensive. The cost of alternative energy, on the other hand, is falling as the technology advances. According to Deutche bank, solar power will be the cheapest source of energy before 2020.

How Green Is My Portfolio

Moving outside the field of finances for a second, clean energy technology is also coming into vogue as more people come to believe that global warming is a real, man-made phenomenon. With this belief comes the question of how we can stop global warming, and clean energy technology is a concrete, actionable solution.

Solar Energy seems to be the front-runner of the clean energy revolution. In the past six years, the market has grown by half, and the value of publicly traded solar companies has jumped from $1 billion to $71 billion since 2004. While foreign companies such as Sanyo, Kyocera, Q-Cells and Suntech are some of the biggest names in solar power, a United States company called SunPower (NASDAQ Symbol: SPWR) has been making some waves in the last two years. It’s stock currently sells for $77.50, and it counts some big names among its customers, from the Department of Defense to Toyota.

Another darling of the solar energy companies, at least price-wise, is First Solar (NASDAQ Symbol: FSLR). The company has had an exceptionally good year, and its stock sits at $214.65 currently. While First Solar has been hurt along with the rest of the stock market by the bankruptcy of the Lehman Brothers investment bank, I think it’ll manage to recover.

Evergreen Solar (Symbol: ESLR), on the other hand, was hit much harder by Lehman’s collapse. The company had share loans with Lehman, and Lehman’s collapse means that about 40 million shares may be lost, diluting earnings by 20 percent. This has played havoc with Evergreen’s stock, and it may be a blow that will hurt for years.

Finally, keep your eyes on William Yuan and his 3D solar cell. It’s a potentially revolutionary piece of clean energy technology that currently draws ten times as much energy from the sun as a traditional solar cell. Granted, Yuan is only twelve, but his invention did net him a $25,000 scholarship from the Davidson Institute for Talent Development—making Yuan the youngest ever person to win that award.

Another new advance in clean energy technology is General Motor’s (Symbol: GM) Chevy Volt. This will be GM’s first mass-marketed electric car, and it’s expected to be released come 2010. It’s a tidy little car that requires only four gallons of gas to travel 340 miles, and it has made the front page of business sections everywhere. The news caused a very slight jump in GM’s stock, but the real test won’t be for another two years. Still, this puts GM ahead of Ford in the race to create a car that runs on clean energy.

Of course, investing in clean energy technology is risky. One of the reasons why is that it depends on politics. George W. Bush and Dick Cheney are not exactly supporters of alternate energy sources. Given their close ties to the oil industry, you can understand why. However, as the recent issue of offshore drilling has demonstrated, conservatives have lined up behind big oil, while liberals have decided to once again champion the underdog. Needless to say, if conservatives carry the elections, you won’t see much energy technology development unless most states decide to start funding it on their own. Government incentives are a key driver in the clean energy technology movement, at least until the big energy companies begin to seriously consider the possibility that clean energy technologies can really turn a profit.

The other risk is that traditional energy prices might fall back to the point where the public doesn’t feel as though they’re getting ripped off. While the Chevy Volt is slated to cost around $40,000, people who pay over $50 to fill up gasoline-powered cars will look at the Volt as a money saver. If the price of gasoline ever drops back to $2, though, traditional cars with their $20,000 price tags will look more appealing.

Still, investing in clean energy companies seems like a safe bet. The human race is eventually going to shift to cleaner sources of energy. It’s just a matter of when.

Chris Gottschalk
Analyst, Bourbon & Bayonets