ThePanelist.com - The Economy Is the Least Important Factor Affecting the Solar Energy Industry

The Economy Is the Least Important Factor Affecting the Solar Energy Industry

Written by David Neubert

Monday, 14 January 2008

Fellow The Panelist contibutor Eben Esterhuizen asks and clearly answers "no" to the question, "Will Recession Lead to A Solar Depression? " To take Eben's analysis a little further, I thought I'd deliniate the factors that do affect the solar industry. Every investor should have an opinion about this list before throwing money after lofty hopes for a clean energy revolution.

Factors affecting the viability of the solar energy industry (in order of importance):
1. Government subsidy/incentives.
2. The amount of sunlight hitting the earth.
3. Technological innovation in solar energy conversion.
4. Energy Prices in this order (gas, coal, oil).
5. Economic Activity (or lack thereof in a recession).

The efficiency of current solar technology is getting better all the time, but still depends mostly (but not entirely) on government incentives. An engineer friend assures me that the technology behind solar panels that convert sunlight into electricity will reach the point where solar energy is a viable competing energy source at some point in the not too far off future, however today government subsidies

and people putting up solar panels for non-economic reasons still means that solar is not an efficient mass energy source. If you live in the desert and electricity is very expensive or diesel-generated, on-site solar makes sense without subsidy.

My point? Make sure you believe (as I do) that government subsidies (and incentives like carbon caps) for solar energy will continue and increase around the world before you buy solar energy stocks for the long term.

Disclosures and confessions: I own no solar stocks, though the recent decline has made me interested in looking around. I do not have solar panels on my house. Embarrassingly, the photo above is of my neighbor's house, not mine. I support government subsidies for solar energy.

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Comments (4)

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written by Adam Waitt , January 16, 2008

Should we be pushing for more government subsidies to promote an industry with little demand? Sounds like a recipe for surplus (and little profits). In my opinion, solar is a good choice as an alternative energy source, but I sure as hell don't want some congressmen making that decision for all of America. After all they are pushing ethanol right now which has way more cons then pros.

How about getting rid of all the subsidies and federal regulations for energy (including oil, coal, corn). When oil prices get to high there will be plenty of demand for solar, wind, nuclear energy. Not to mention a pure free market for which the beauty competition to work its magic and foster increased innovation and lowering costs.

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written by Tom Konrad , February 05, 2008

One other important factor to consider: supply of solar grade silicon, which has been a limiting factor in recent years on PV output. Supply is increasing quickly.

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written by former collegue , February 08, 2008

Dave, You wrote a while back that you would load up on US REITS at the "nadir of the stagflation cycle". When is that? Trying to grasp what you meant, I think you meant when the econ. is choking, as it seems to be now...Are we there yet?

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written by David Neubert , February 10, 2008

REITS. Not yet.

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