Solar stocks may be trading too high.
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According to Sarasin, global solar cell production jumped from 1.7 gigawatts to 2.5 gigawatts in 2006 as a bottleneck in the manufacture of solar-grade silicon cleared. That's good news for consumers and policy-makers but less exciting for the producers of silicon, wafers, cells and modules - which is almost every quoted solar company. Fat margins, which together with growth expectations have fuelled nose-bleed share prices, look set to tumble.
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Somehow, I'm not disappointed...
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/11/20/ccinv120.xmlIs the future for solar energy really so bright?
By Tom Stevenson
Last Updated: 1:37am GMT 20/11/2007
It is hard to imagine a healthier backdrop for alternative energy companies than that provided by today's nervous times. The oil price has $100 in its sights, politicians are engaged in a greener-than-thou race to the environmental high ground and energy security is right at the top of policy-makers' agendas as geopolitical tensions continue to simmer.
Here in Britain, and with half an eye on David Cameron's ostentatious greening, Gordon Brown has been persuaded that early action on climate change is imperative. Britain's renewable energy targets, demanding as they are, now look like being just the starting point. Similar voter-led policy developments are happening worldwide.
It is hardly surprising then that a new report from Swiss private bank Sarasin should present such a bullish view of the outlook for growth in the global solar energy industry. Photo-voltaic cell production rose 44pc last year, Sarasin says, and it forecasts 50pc a year growth for the rest of this decade and then a further 22pc a year until 2020.
Put that on a chart and the numbers for annual installations start to head pretty steeply up the page. The power of compounding means the size of the industry quickly becomes serious. The performance of the solar industry's publicly quoted companies - the main index of solar stocks has doubled so far this year - looks understandable, if dizzying.
Matthias Fawer, the author of Solar Energy 2007 - The Industry Continues to Boom, which is published today, believes growth in the industry might be close to a tipping point. Dramatic reductions in costs, he says, will make solar power competitive with conventional forms of electricity or heat within 10 years.
The industry is currently fuelled almost wholly by government subsidies, but once the big power generators see "grid parity", solar bulls argue, the economics change completely.
Currently, solar is two to three times too expensive to be competitive, says Bruce Jenkyn-Jones at environmental investor Impax, compared with a few percentage points for rival technologies like wind. But developments in areas such as thin-film technology are rapidly bringing costs down. Solar's time may really have come.
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