Jack Yetiv

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    • Greentech Media: Solar Sector Headed for a Shakeout
      I have read the article and comments twice, and I'm not sure what the author's thesis is. Is it that no solar stock is worth buying today because there is going to be a "shakeout"?

      Since when does one write off a whole industry--especially one that many people believe will grow at a compound annual growth rate of 50% or more--just because there are potential problems (on which there is no consensus, but rather a large degree of disagreement) coming down the pike?

      The analogy to the dot-com era is highly questionable, given that several of the solars are making money and trading at PE's of 10-15 despite growth rates expected to exceed 100% this year, whereas many of the dot-com companies that crashed never made a penny.

      There certainly are some companies in the solar space that I strongly believe are overpriced and will stumble, but does that mean that no company in this space is worth buying?

      Jack Yetiv
      Feb 25 21:33 pm |Rating: 0 0 |Link to Comment |View article
    • The Current State of the Solar Energy Sector
      To Catcher N The Rye (catchy name!):

      You are correct that today, there is little connection between crude oil use and electric use in the US, but many believe that in two decades from now, that will be much changed. I believe that electric cars (actually, some version of plug-in hybrids, PIH's) will be the most common type of car sold in 2025--if not in 2020. Those cars WILL SUBSTITUTE electricity for oil products. Indeed, Israel is expecting to achieve the above goal within 10 years.

      This is why many of us see solarly-generated electric as (at least in the future) a substitute for oil. The beauty of this substitution is that there is enough sun resource in the US to produce all the electricity we need for our homes, offices, AND cars/trucks/semi-tract... etc, decreasing the need (and hopefully eliminating it) for us to important oil from countries that don't like us (to put it mildly). Because we have such a large installed base of gasoline/diesel-powere... vehicles (about 250 million of them) in the US, this goal will take decades to realize, but there is little question in my mind that this is where we are going to go.

      Electricity is the only realistic substitute for oil in our transportation network.

      Although it will take a long time to populate this country with PIH's, you won't have to wait too long to see the beggining of that road. I predict that in 2010--just two years from now--we will be able to buy a plug-in hybrid that will get hundreds of miles to the gallon if its daily commute is less than the normal 30-35 miles per day.

      Jack Yetiv
      Feb 19 11:38 am |Rating: 0 0 |Link to Comment |View article
    • The Current State of the Solar Energy Sector
      As someone who closely follows the solar space and holds a large position in Canadian Solar (my favorite solar stock based on valuation--see my article on the topic under CSIQ banner), I agree with much of what has been said above. I want to highlight a few points.

      First, grid parity will come in stages--not all at once in x number of years--and indeed, we are at grid parity in some areas already (see my article on grid parity). Second, achieving grid parity will be helped MORE by the difficulty in building coal-fired power plants THAN BY decreasing cost-per-watt of solar (although, of course, that is very important). For various reasons, it is going to become much harder to build coal-fired plants, and the ones that do get built (many won't) will cost a lot more. That process will help get us to near-universal grid parity faster than most people realize.

      I believe FSLR's cost advantage will decrease much faster than others do. Poly is at $200 per kilo or more these days. Many people expect poly to reach $50 per kilo within 2-3 years, and when it does, the price of silicon panels will be much closer to FSLR's panels than most people seem to be thinking. In addition, because FSLR's panels will probably be 11% efficient in 2009, and silicon panels will be in the low 20's, you need twice as many FSLR panels to make the same amount of electricity as silicon panels. This means that some of FSLR's remaining cost advantage will be eaten up by material (aluminum for frames, etc) and manufacturing costs involved in making two panels instead of one.

      However, I think the demand will grow sufficiently that many (if not most) solar companies will be able to ramp revenues 50% and more annually (depending on execution) for the next several years. I want to highlight something that is not widely appreciated--it seems that some folks believe that FSLR will steal sales from its competitors, but in fact, although FSLR has a cost advantage, it simply does not play in the residential solar space, and I believe that growth in residential demand in 2008 and 2009 will be substantial. That means that there is a big and growing residential pie to split among the companies making silicon-based solar panels.

      I agree that utility use of solar is an extremely exciting prospect but want to underline that 2008 will only be the pilot-demonstration stage for this. I doubt any significant quantity of solar power plants will come online before the end of 2009, and more likely, it will happen in 2010.

      I also agree that federal solar tax credits will be extended and I believe that many states will roll out their own incentive programs as more citizens object to coal-fired and even nuclear power plants. In addition, other countries will roll out solar incentives--Italy comes to mind, and some countries will continue to (or begin to) heavily subsidize solar in other ways (Israel comes to mind because there is a strong political incentive in Israel to help the world wean itself from OPEC oil).

      In sum, the size of the solar pie will grow enough such that I believe that all well-run companies in the solar space won't be hurting for customers for the foreseeable future. We may see some consolidation (mergers and acquisitions) to achieve larger scale, and certainly, marginal players will fall by the wayside.

      But generally, I think the prospects for solar in the next few years are exciting indeed.

      Jack Yetiv

      Feb 17 11:45 am |Rating: 0 0 |Link to Comment |View article
    • PV Industry in Oversupply in 2008
      Very well-done article, and good food-for-thought. However, there are several factors that I think you failed to address in your analysis, some of which have been alluded to above: (1) Your capacity figures are "planned," or "projected." We all know how rosy projections may be sometimes. Reality often falls far short. (2) You assume a static capacity situation--ie, companies failing to respond to developing overcapacity. Although they may not be as ahead of the curve as they should be, the companies will respond--although probably not quickly enough nor with enough cancellation of capacity to eliminate overcapacity, but I think it will reduce it substantially. (3) In the tight lending environment that exists now and probably will into 2008 and probably beyond, even if solar companies want to over-expand, they may find themselves limited by ability to borrow. Equity capital (by issuing more shares) will also be limited by the fact that many solar companies are going to get a well-deserved haircut (on top of the one they already got in the past two weeks). (4) Finally, although there will be some margin compression, I don't think it will be as serious as you seem to believe because I believe ASP's for silicon will trend downward with decreasing panel ASP's--unless a company has locked in high silicon prices and is therefore unable to reduce its silicon costs while suffering lower ASP's on panels. Of course, said company may protect itself by simultaneously contracting for BOTH silicon supply AND prices for its panel production.

      As to the demand side, if the democrats come to power--especially if they control both the presidency and Congress--I would not be shocked to see solar incentives not only extended but also enhanced.

      Jack Yetiv
      Jan 17 00:12 am |Rating: 0 0 |Link to Comment |View article

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