Solar Power 2007: Discussion Panels Aplenty – Part 3

Cost Competitiveness, CEO Panel, and Solar Stocks

To recap, Solar Power 2007: Discussion Panels Aplenty – Part 2 covered the CEO Panel Discussion with topics ranging from the Photovoltaic (PV) Industry Outlook to Silicon.

Part 3, the last installment of this series, tackles the Investing in Solar Stocks: What You Need to Know session moderated by Rob Stone, Cowen and Company with speakers:

Joe McNay, Chairman, Chief Investment Officer and Managing Principal, Essex Investment Management Company
Jesse Pichel, Vice President and Sr. Research Analyst, PiperJaffray
Sanjay Shrestha, Managing Director and Senior Alternative Energy Analyst, Lazard Capital Markets

I arrived late to this session from an interview and missed an opening presentation by a speaker who was not listed in the program. For some reason, the room lights were left dimmed for the rest of the session as you will observe in the video clips.

I thought the session got going with Jesse Pichel’s PV Industry Forecast for 2010. Mr. Pichel predicted a market size of 8 to 10GW (GigaWatts) with 7 to 8GW crystalline silicon and 2GW thin film solar modules depending on US market development.

In 2010, Mr. Pichel predicts overcapacity will drive solar module prices down to a clearing price of $2 per Watt translating to a $3.50 to $4.00 per Watt installed price and driving “unlimited demand for a few years”.

In this scenario, Mr. Pichel recommends avoiding pure commodity solar module suppliers and instead investing in companies with competitive advantages such as low cost manufacturing (China), vertically integrated manufacturing, or owning their own polysilicon supply. Later in the video clip, Sanjay Shrestha discusses unsustainable silicon prices, volatility, demand, price, the cost curve, turnkey suppliers, and downstream companies.

Here (, Mr. Shrestha talks about the importance of retail grid parity to reduce the PV Industry’s dependence on subsidies and cautions the chance of passing a new US Energy Bill this year is 50/50 at best. However, Mr. Shrestha also believes “the US is a natural market for solar” and with the right policies the US could be a 1GW solar market by 2010.

High Concentration PhotoVoltaics (HCPV)
Mr. Shrestha says HCPV has potential if it gets to less than $1 per Watt, but he believes it may compete against wind and other renewables in centralized applications and lose the traditional solar electric benefit of distributed generation (

Mr. Pichel suggests playing an upstream option on HCPV by investing in EMCORE Corporation (NASDAQ:EMKR) or Boeing Spectrolab. While Emcore may be a reasonable play, an investment in Boeing is more about the 787 Dreamliner and their defense business than photovoltaics (

Solar Incentive Programs
Jesse Pichel sides with a Feed-in Tariff approach over capex (i.e. rebate) programs because of the “Stop and go policy” issue and the long term returns provided to Photovoltaic system investors. Mr. Shrestha believes the key is to have a policy that gets the PV Industry to retail grid parity and will incentivize utilities to embrace distributed generation (

Focus versus Vertical Integration
Mr. Shrestha points out how varying strategies can lead to long term sustainable competitive advantage for solar companies, but this will depend on the market environment tipping Q-Cells, Suntech Power, and SunPower as having favorable positions while pointing out pitfalls for SunEdison and Conergy (

Solar Stock Valuations

esse Pichel chimes in on First Solar, and Sanjay Shrestha covers SunPower.

Although Mr. Shrestha claims SunPower has a reasonable valuation, I believe SunPower is priced to perfection with a Price to Earning (P/E) multiple of over 393 at post time, and SunPower is my choice for the most overpriced stock in the solar PV space.

By contrast, since the stock correction in August 2007, First Solar’s stock has been relaunched to a high multiple P/E of about 164 by plans to almost triple their production capacity. First Solar has achieved the lowest PV Industry variable production cost per Watt, $1.29 in Q1 2007, at 104MWp (MegaWatt-peak) production scale, and has a below multicrystalline silicon solar module pricing model to accelerate sell through. I have noticed a pattern of jealousy, contempt, and fear of First Solar from competitors across all the conferences and tradeshows I have attended over the summer and fall of 2007.

What about LDK Solar Co., Ltd.? I haven’t followed this company and only wrote about them because of the recent Sunways deal (Sunways Reactor-Wafer reversal deal with LDK Solar). I believe a company building a Polysilicon Production Plant is worth watching, but the question remains what is the proper valuation of the stock? Greentech Media has been on top of this unfolding story since the beginning. See New Details Surface as LDK’s Stock Continues to Plunge and LDK Steps Up 3Q Guidance for the latest coverage.

Before Solar Power 2007 began, I intended to write a preview article detailing my topics of concern for the conference. These concerns were three fold: the R-Word (Recession), revisionist Solar Incentive Policies, and the most overheated solar stock (SunPower).

Of these three, I was listening for hints of concern about a US recession or economic slowdown (Just Don’t Say the R-Word). My fear is the US housing bubble and its liquidity crunch aftermath will result in a slowdown or recession in 2008 later impacting the world economy. I observe the PV Industry and Renewable Energy boom has coincided with a robust long term expansion of the global economy, and I wonder if concerns about global warming will continue to drive high PV Industry growth rates through a global recession.

Worldwide stock markets have recovered from the August 2007 correction, and the claim is things are different because global economic growth does not depend on the US but is driven by BRIC (Brazil, Russia, India, and China) nations. Here are some links for further reading:

Double Warning That a Recession May Be on the Way
Don’t mention the R-word, but prepare for a slowdown

As an optimist, I will be happy if my R-word concerns are proven unfounded.

One comment

  1. Sudersena Rao says:

    I enjoyed reading the report on Panel discussions. Looks like, coming 2 years there will be huge consolidation in Solar cell/module market as a result of excess Si supply.


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