Monday, February 26, 2007

Will Solar Electric Systems Hurt Utilities?

I found this comment from a recent newspaper article interesting (source)

"Needless to say, electricity utilities are watching the solar revolution with horror. Companies in Japan and Germany have already seen an erosion of profits because of an effect known "peak shaving". In essence, the peak wattage of solar cells overlaps with hours of peak demand and peak prices for electricity in the middle of the day, crunching margins."

I believe the article. But as I write in my last posting - I forecast that space and water heating will be increasingly electric (hopefully using heat pumps), and transportation will be increasingly electric (using plug in vehicles and electric mass transit). So in general, we will be seeing electricfication and movement away from oil and natural gas. Thus I see electric utility's market/sales continuing to grow.

We are starting to see utilities wanting to own wind farms here in Wisconsin (rather than signing a power purchase agreement with a third party wind farm owner). A trend that suggests utilities are starting to get renewables. Perhaps utilities (or their non-regulated utility entities) will get solar electric systems one day and own solar electric systems on their customer's sites. That could be a great growth area for utilities.

If solar becomes common - the utilities peak will move away from the mid-day hours towards evenings, and towards cloudy winter days. Either a dispatchable power source will be needed (biomass plants?) and/or the batteries in plug in cars and other devices could be used to store power for periods of hours and a few days (given we have a smart grid).

So don't worry utilities - solar will not put you out of business, nor will carbon taxes, increases in natural gas prices, or more efficient homes. You will only need to get smarter - and let more happen at your customer's sites (generation, storage, load shifting, etc.)

Friday, February 23, 2007

The Futre of Energy - A forecast

Oil and Gas
1. North America is running out
2. We will import it at increasing prices
3. Resulting in huge trade deficits, all kinds of bad geopolitics...
4. Oil sands are but a drop in the bucket (oil shales not worth the effort)
5. Then the world will run out (could be some very rough times)

1. Lots of it around - but harder and more expensive to get at
2. Climate change/carbon trading (climate change will occur faster than they think)
3. Cheapest way of sequestering carbon will be to leave coal in the ground

Good Farmland
1. The basis of wealth in the sustainable future
2. Will increase in value
3. Grows food
4. Grows energy (sugars, oils and cellulose)
5. Plant wind turbines
6. But with less and less petroleum based chemicals and fertilizers productivity will decline

1. Goes from natural gas and propane
2. To solar thermal, passive solar design and electric heat pumps
3. With increased efficiency (and smaller buildings)
4. Rural areas use more biomass/wood stoves (including grass pellets)

1. Goes electric
2. Goes rail
3. Plug in hybrid biofuel cars
4. Biofuels for longer travel and electricity for short trips
5. Smaller vehicles and less travel
6. Gets expensive (see the world while it is still cheap)
7. Rich will drive (while the poor starve)

Power Generation
1. Natural gas too expensive for power generation
2. Coal with carbon taxes declines
3. Wind farms move off shore and into the big windy areas (with beefed up transmission networks)
4. For about a decade or two nuclear returns (a transition fuel)
5. Solar electric farms in the southwest
6. Solar electric standard on commercial buildings and homes
7. Solutions found for large-scale electricity storage

Big general trends
1. Energy goes electric (from cars to space and water heating)
2. Solar electric, and solar thermal are huge
3. We will live smaller (homes, cars, refrigerators...)
4. Energy efficiency is huge and implemented through legislation5. We will live more locally (food, travel, work from home...)
5. Eventually the county with the best farm land (that is well above sealevel) per capita will do best (Canada or the US perhaps?)

Thursday, February 22, 2007

Solar Electric Boom - Applied Materials

Finally US investors are beginning to understand that solar power has a future. Remeber in April 2006, when I wrote here that I envisioned and Clean Energy Wave. Well I believe it is well underway.

Solar Electric stocks traded in the US have leapt in value over the last months. Take a look at these: First Solar (FSLR), Trina Solar (TSL), SunTech Power (STP) and SunPower (SPWR). I am an investor in STP and SPWR. I was not agile enough to get in on FSLR and TSL - and they are up about 80% in a month. Of course this cannot be sustained.

It is interesting that this surge occured just after Pres. Bush's mention of climate change in his state of the union address and the release of the IPCC report on climate change. I believe they are related.

OK, let's not pay so much attention to stock prices. Lets talk about the future of solar power. (It is gonna be huge - most people have no idea.) The future of solar power is all about reducing its cost per watt. And I mean significantly. While maintaining quality and hopefully 25-year module warrantees.

TSL and STP are in China and currently make fairly conventional crystalline silicon low-cost good-quality modules. To significantly reduce module prices they will need to significantly change how they make panels.

SPWR has their main factory in the Philippines and makes a complex crystalline silicon module with the highest efficiency of any module on the market (close to 20%). It is not a cheap panel. However the complexity of their panel shows (e.g., wire pickup on the backs of the modules) that they have both technical and manufacturing savvy. They may be better positioned than TSL and STP to make the technical leaps need to significantly reduce modules costs. (Q: But what do I really know? A: Not much.)

FSLR makes their modules out of Cadmium Telluride, which are rare 0r poisonous metals. However their cost is really low. I read somewhere, (Photon International magazine perhaps) that there manufacturing cost is under $1.60 per watt. FLSR’s conversion efficiency is also much lower than a crystalline module, around 10%. I did not buy the stock because I know nothing about this type of module. It has been on the market of less then five years. I do not envision a huge market for it (afterall telluride is rare) and they will be all on their own when it comes to R&D and improving their manufacturing process.

Now let me throw out my current favorite "solar" stock. They will not make panels but the assembly lines that make the panels. With their assembly lines any firm with money and the ability to run a large plant will be able to make either thin film or crystalline panels. The firm is Applied Materials (AMAT).

AMAT has a market capitalization of over $25 billion, sales of about $10 billion per year, and has been around for 40 years. AMAT "engages in the development, manufacture, marketing, and service of fabrication equipment for the semiconductor and semiconductor-related industries worldwide." Google "AMAT, Solar and Piper Jaffray" – to hear their recent, Feb 21, solar presentation.

They have already sold solar equipment to Q Cells of Germany, Nanosolar (a VC start up) of California and SunPower of California (source). AMAT is forecasting $500 million in solar sales by 2010. Their first generation thinfilm machine makes a large sized panels (the size of garage doors) with about 10.5% efficiency.

As far as I know, AMAT is the largest firm to step into the solar market in a serious manner. Here are some recent quotes from the media (source):

"Mike Splinter, chief executive of the US semiconductor group Applied Materials, told me his company is two years away from a solar product that reaches the magic level of $1 a watt."

"Cell conversion efficiency and economies of scale are galloping ahead so fast that the cost will be down to 70 US cents by 2010, with target of 30 or 40 cents in a decade.” We think solar power can provide 20pc of all the incremental energy needed worldwide by 2040," he said."

"Applied Materials is betting on both of the two rival solar technologies: thin film panels best used where there is plenty of room and the traditional crystalline (c-Si) wafer-based cells, which are not as cheap but produce a higher yield - better for tight spaces."

They also forecast using 7 grams of silicon for their crystalline panels. And "By 2010, crystalline silicon solar cells will sell for about $1.25 to $1.50 per watt, while thin-film solar cells will sell for 90 cents to $1.30 per watt. The thin-film cells, however, will be less efficient." (Source ) Note, they are talking "cells" in that last quote, and cells have to be assembled into modules or panels.

So today I purchased some AMAT stock.

Yes, at first solar will be a very small share of AMAT's business and their chip business may continue to falter. But with their business expertise, financial resources, and engineering might, I foresee that they will rapidly grow into and take leadership of the solar cell production line market place.

The question is, could the relatively small firms that purchase AMAT equipment do better than AMAT? The answer is probably yes.

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