Cost of Solar Energy Continues to Drop-Closing in on Coal
No surprises on the trend of solar energy: costs are going down, and installations are going up. In an article entitled, "Solar Costs May Already Rival Coal, Spurring Installation," Bloomberg reports today that analysts are predicting that solar panel installations may "surge" in the next two years "as the cost of generating electricity from the sun rivals coal-fueled plants." Bloomberg New Energy Finance is predicting that large solar energy projects will cost $1.45 a watt by 2020, half the current price, and that "solar is viable against fossil fuels on the electric grid in the most sunny regions such as the Middle East."
The trend line is unmistakably up for adoption of solar energy, but even with rapid growth, the solar component of the energy portfolio is still ridiculously low. Sebastian Copeland writing on Huffingtonpost.com properly points out that there is still an enormous upside for solar and other renewables. As he writes, "renewable strategies have slowly but steadily gained momentum offering safe and economically viable energy solutions. The latest generation of solar panels is a milestone over its predecessor. The new technology is said to be three times cheaper and four times more efficient." Nevertheless, as he points out, solar and other renewables represent a miniscule proportion of the energy portfolio. Copeland properly notes that "when an industry like solar sees a growth of 51% in 2009 (and 89% the year before), you know we are talking about small numbers (0.01% of total output or 1.38% of renewables)! In fact, all renewable energy industries combined amounted to about 11% for 2010, which includes hydropower and biofuels, while non-renewables account for almost 90%, half of which is coal. With each climate disaster, or spike in the oil price, the nation hits the panic button and demands immediate solutions."
Analysts are not timid about what this may mean for the prospects of solar. According to Benzinga, investors may need to rush to buy some solar stocks: "If investors believe that the cost of solar has come down and is now comparable to the cost of coal (NYSE: KOL) produced electricity, we could see a massive wave innovation and disruption in the energy markets, the likes we have not seen since the internal combustion engine was invented some 100+ years ago."
You may not have to wait in line long, though. We checked Morningstar to see how some of the solar stocks are doing. Canadian Solar, Inc. is down 12% for the year, and don't even get us started about Evergreen Solar, Inc., which is down 61% for the year. The low cost Chinese producers, Yingli Green Energy Holding Company Ltd. and Trina Solar Limited ADR are up 26% and 22%, respectively. Strategy still makes a difference in the solar energy market, and a rising tide is not going to lift all of the ships in this market.