There are a growing number of “solar bears” out there like Jim Chanos, a professional short-seller who is convinced China is poised for a 2008-style crash and who is also selling short stocks like First Solar (FSLR) and Vestas Wind (VWDRY.PK). (What does Chanos like? Would you believe Citibank?) (Picture from Wikipedia.)
Personally, I don’t know whether Chanos is right about those stocks or not. First Solar is a popular short because it’s the best-performing U.S. solar play. Fly high and the assumption is you’ll fall fast.
But two big mistakes are being made here:
People are confusing specific companies with the industry. Costs per-watt in the renewable industry are continually going down. This makes picking a winner tough, but it is proof that there is serious upside to the sector as a whole. After all, what is happening with the price of fossil fuels? Most are up, way up. If your costs are declining and your opponents’ are rising, you’re winning.
A lot of analysts are focused only on the outlook for grid-scale projects, and most projects aren’t very big. You don’t get big new plants without multi-year timelines and (often) subsidies. But small plants, even non-plants (like the cells on my sister’s house) can add up. And with costs declining, growth is certain.
Measurements like those of Ernst & Young are especially misleading. “China widens lead over U.S.” reads the headline, but in fact the outlet there is only marginally improved, and outside the area of wind energy our outlook is actually stronger.
The outlook for wind and solar is further improved by things like GE’s new mini-gas plants, which can take up for intermittent power sources while storage technologies develop. And for every company the stock pickers are dissing, like First Solar, there’s always one they’re hot for, like SunPower (SPWRA), which has just bought PowerLight Corp.
If you don’t confuse companies with an industry, and if you broaden your outlook, you’re going to find a lot to like in renewables a lot worth training and hiring for.