This sector defines investment risk. Not only has Evergreen Solar, Inc. [ESLR] filed for bankruptcy, investors in another high visibility solar developer have been saddled with a 72% loss over the last week. In a massive shift that has to shake confidence in the company, Germany’s Solar Millennium AG [S2M.DE] announced on Thursday said it will convert the first 500 megawatts of its 1,000 MW Blythe solar power plant in the Mojave desert to PV. It will decide what technology to use for the second half of the project at a later date. Nor has it revealed the charge it will need to take due to the shift.
It’s not just these companies. The two solar sector specific ETFs [KWT and TAN] have lost 36.8% and 33.2% respectively this year. This is about double the loss broad-based market indices have suffered and lead the losses across all the clean energy ETFs and mutual funds. In fact these losses have depressed the size of the sector specific ETFs for wind, solar, and smart grid to where only the Guggenheim Solar ETF [TAN] has a market cap greater than $100 million. The other four ETFs market caps are below a rule of thumb $70 million threshold required for the ETF sponsor to make money. So I wouldn’t be surprised to see some of these ETFs shut down like the clean transportation ETF [PTRP] did last December.
That said, solar companies may be great technologists with good products. With falling panel prices it looks like PV is on track to wipe out solar thermal projects and is making progress on being grid competitive. Of course, in the US with natural gas prices constrained by the technological breakthrough that brought about shale gas, the bar for solar PV is being raised. Whether solar can reach parity (and without the support of creative ratemaking that turns $4/mmBtu gas into 20 cents/kWh power in the summer) is still not answered. But if so, solar companies with depressed stock prices may turn into good investments.
Mark Henwood founded and directs New Energy View. This site grew out of the experience gained in developing Camino Energy and retains many of Camino Energy’s functions. Mark is the CEO of Henwood Associates (a Sustainable Energy Business), serves on the board of PLEXOS Solutions LLC., and manages a diversified portfolio of equities and fixed income. Mark was a board member and advisor to PowerLytix, LLC until April 2008 when it sold to Barclays Capital. He is also active in promoting sustainable energy businesses in Sacramento, CA through his involvement with CleanStart where he is Vice Chairman and with start-ups as a venture partner at Velocity Ventures LLC.