The Future Of Solar

By Joseph Nguyen | August 30, 2010 AAA

The economy is in the doldrums and one of the sectors being dragged down with it are the solar techs. A flurry of negative data came out of the U.S. during the Aug 22-28 week. It started with the disappointing existing home sales report, coming in at 3.83M against expectations of 4.68M and down 27% from the previous month. In addition, core durable goods and new home sales data were well below expectations, coming in at -3.8% and 276K respectively.

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Solar, as a long-term play, has a mountain of potential. Solar technology, in particular, manufacturing processes and cell efficiencies, continue to consistently improve. Researchers at the Centre for Solar Energy and Hydrogen Research just recently reported setting a new world record for CIGS (a form of thin-film) cell efficiency, reaching a top efficiency of 20.3%. Efficiency is simply the amount of light energy being converted to electrical energy.

For comparison, in expensive polycrystalline and the more expensive monocrystalline cells, efficiency can range from 12-20% and 15-27%, respectively. The one major drawback of thin-film solar cells has always been their low efficiency relative to silicon cells, but the tides could be turning. It will be quite some time before CIGS cells with efficiencies at 20% will be commercially available, but the future looks promising for the cheaper alternative to crystalline silicon. Experts expect commercial CIGS thin-film cells to present major competition to crystalline silicon cells within the next three years.

Let's see how some of the major solar producers have done in the last year:

Ticker Company Performance (Year) Market Cap P/E Shares Float Float Short
Nasdaq:SPWRA SunPower Corporation -57.64% 979.93 38.58 96.99 16.75%
NYSE:STP Suntech Power Holdings Co. Ltd. -53.70% 1387.15 13.28 178.02 7.41%
NYSE:YGE Yingli Green Energy Holding Co. Ltd. -33.71% 1556.59 26.2 24.63 19.89%
NYSE:TSL Trina Solar Ltd. -10.74% 1680.04 10.34 69.74 6.14%
NYSE:LDK LDK Solar Co., Ltd. -7.28% 854.23 11.61 130.78 8.17%
Nasdaq:FSLR First Solar, Inc. -6.44% 10837.47 17.43 54.29 19.62%
Data obtained as of 08/26/10

As you can see from the list, many of the major solar companies fell heavily in the past year. The worst performing solar company on our list was SunPower Corporation, down 57.6%. And at the bottom of the list is who else but the thin-film cell juggernaut, First Solar.

It's not surprising that First Solar has fared well relative to the sector. The company has superb margins and is a leader in thin-film cells, which is the fastest growing segment in the solar industry. In addition, according to their second quarter report, First Solar continued their cost reducing ways, shaving $0.05 off the manufacturing cost of Photovoltaic (PV) modules to $0.76/watt.

The Bottom Line
Buyers of solar cells look for two main things, low price and high efficiency. As technology continues to improve, it appears as though thin-film cells will strike a good balance between these two needs. And the company that currently dominates the market in thin-film PV cells may be a good place to start if you're looking for a long-term play on the solar market. (For related reading, take a look at Spotlight On The Solar Industry.)

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