What the #%*!? is Going on in the Solar Energy Industry?
The whirl of events have left even the closest market observers shaking their heads in disbelief at how much has changed in the solar industry over the past several months.
Solar industry booming
The solar industry is one of the fastest growing industries in the United States. Just how much is the solar energy business growing in the US? Well, a lot if you are counting watts. If you take the second quarter of 2010, 186 megawatts was installed; 2011, 314 megawatts, or an increase of 69%.
Solar companies get hammered
The irony is that despite this explosive growth in the solar industry and a lot more people putting solar panels on their roofs, solar companies are getting hammered. Their margins are being squeezed and they are not making much money. I am not even talking about the woes of Evergreen Solar, which filed for bankruptcy and is down 99% year-to-date. We won’t even talk about the spectacle of Solyndra, the financial problems of which may only be the least of the problems for some of the executives there. (When the FBI comes knocking on your door, they are usually not bringing gifts.)
Investors in solar companies get crushed
If you are or were an investor in solar energy stocks, don’t even look at your stock holdings unless you want to barf up your breakfast. Even leading solar energy companies are way down, like Suntech, which is down 70% year-to-date, and Canadian Solar, down 71%. Consider yourself lucky or prescient if you invested in Kyocera—you are only down 12% this year.
Economic incentives are down
Any market likes to see a stable legislative environment. So the good news is that Congress had the foresight to extend the investment tax credit to 2016. That is the good news. The bad news is that local and state incentives come and go as quickly as the nightingale. The 1603 Treasury Grant program is set to expire at the end of the year, although there is a proposal to extend it. Line up today or the incentives are gone tomorrow. With most rebates and grants, you either get it all or not, with the exception of the SRECs—the solar renewable energy credits. SRECs in New Jersey were selling for over $600 two years ago, and now they are hovering at about $200.
Consumers are smiling
Despite this bad news, consumers are happy because although solar companies are taking it in the shins, the reduction in prices of solar panels that homeowners want to put on their homes has been rapid and sharp. Just this year alone, the average cost of a solar module has tumbled more than 30%, and similarly the overall cost for a home solar panel system has come way down. Prices that we could have not even dreamed about a year ago are now commonplace. The prices of our discount solar panels at SolarTown have probably come down by even more than 30% and now the least expensive solar module can sell to our customers for less than $1.50/watt. It has been an amazing few months in the solar industry–stay tuned for the sequel in the months to come.