Solar Energy - Green Chip Stocks

China Solar Advantage

Last year, SolarWorld AG filed a complaint with the Department of Commerce to counter low-cost solar imports from China.

SolarWorld claims that China's subsidies violate global trade rules and provide Chinese manufacturers with an unfair advantage.

They're right in that China offers huge subsidies for its solar industry. But is it unfair?

Certainly if you can't pump out solar panels cheaper than a heavily-subsidized manufacturer in China, you're not going to be happy. And I can't say I blame you.

But before we start throwing stones at China, let's remind ourselves that for years, we did a very good job at hindering domestic solar development on our own. Thanks mostly to useless Washington bureaucrats and the special interests that have long controlled them.

As a result, China beat us to the punch. And they're doing it again with wind energy, too. While lawmakers debate over what amounts to pennies offered in the form of a production tax credit for wind, China's also now becoming the largest manufacturer of wind turbines.

I have to be honest. From where I sit, it looks like we consistently missed some opportunities here, and perhaps we need to look in the mirror before we start demanding unreasonable tariffs and start a very dangerous trade war that could actually hurt the domestic solar industry even more.

In fact, just today we learned that more than 50,000 U.S. jobs could be threatened by tariffs on Chinese solar-energy equipment that some American companies are now seeking.

This news was released in a report by the Brattle Group, which published its data in response to the original SolarWorld complaint.

According to the report, 100 percent tariffs would result in 50,000 lost jobs and $698 million to $2.6 billion in losses to consumers. Tariffs of 50 percent would cut as many as 43,000 jobs.

Jigar Shah, founder of Sun Edison responded to the report by saying. . .

“We cannot allow one company's anti-China crusade threaten the U.S. solar industry and tens of thousands of American jobs.”

Shah has been very outspoken on this issue, and earlier this year offered a pretty solid argument to the Managing Director of Cleantech Research at AURIGA Securities. Take a look:

"I write to you not from one trading desk, but representing the 1,000 or more rooftops where I have deployed solar.

I write to you representing more than 97 percent of the U.S. solar industry. These are the people who have not only visited factories where solar panels are manufactured, but who have actually worked in those factories, and many more who have worked assembling, installing, and maintaining solar systems.

At a trading desk, one is managing portfolios, trading prices of commodities like solar panels and more. You may even be concerned about the cost of silicon chips used in computing (but we are not complaining about the low cost of silicon chips manufactured outside the U.S. in this dialogue).

Every day, we, the actual people who work in the solar industry, are interested in growing the deployment of solar, particularly at a cost that creates grid parity, location by location. More importantly, we are interested in preserving and growing the 100,000 American jobs in the industry, which, according to the 2011 National Solar Jobs Census published by the Solar Foundation, grew 6.8 percent between 2010 and 2011 -- nearly ten times higher than the national average employment rate
of 0.7 percent.

Real jobs. Real people. Using real tools.

By the way -- on the theoretical stuff, many of your colleagues disagree with you and might provide you with a bit of insight and education. See below:

Photon Consulting: “Overall, trade restrictions between the U.S. and China will destroy value in the global PV sector. Equally important, imposition of artificially higher prices for solar consumers would undoubtedly slow the adoption of solar power in key markets such as the US.”

Jefferies: “The U.S. solar industry, already suffering from a lack of financing, will experience higher module prices and lower demand if countervailing duties are imposed as early as March 2012.”

Axiom: “There is simply more supply than there is demand," Johnson said. "It's very simple economics." And it's not the Chinese's fault, Johnson said: "You can't complain because a guy is beating you," Johnson said.

AEI Research: “Higher module prices are likely to lower the excess return, putting solar energy at risk of losing years of economic potential as a result.”

SEMI: “This case could lead to significant price increases that could have a significant deleterious impact on SEMI members, many of whom are upstream providers of high-value-added equipment and materials. It will also impact downstream service providers, such as installers, where a majority of solar industry jobs are concentrated."

I'm sure there are plenty of folks who will disagree with me on this. And that's fine. But I maintain that while we blame others for our own complacency and incompetence, others are capturing more and more market share of what is certainly to be one of the greatest investment and growth opportunities of the 21^st century.

This is simply unacceptable.

Approaching Solar Earnings Season

Three weeks ago, I wrote to you about Goldman's upgrading of the solar sector.

I concluded by saying that my top pick was the same as Goldman's: JA Solar (NASDAQ: JASO). It was trading for $4.64 that day.

Today?

If you'd have taken my advice, you could be sitting on a 33% gain in the same time the Dow dropped another 5%:

But not to worry, solar stocks are going to deliver plenty more returns this year... if you know how to play them.

Banking on solar

To recap, here are the bullish points Goldman offered about the solar sector:

benefits from large-scale projects ultimately overwhelming near-term challenges and accelerating the transition from subsidized markets towards parity
widespread grid parity as early as 2012
higher-than-expected demand and price declines will deliver stable returns even without subsidies

I noted that companies have to reduce costs, foster customer relationships, and enter new markets as solar becomes increasingly commoditized.

And last week, another bank validated my assertions.

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According to research put out by Jefferies analyst Jesses Pichel, “brand positioning and cost structure will determine solar company profits and valuation in 2011.”

But that was only part of what the bank had to say...

It also noted that 2010 industry volumes should reach 12.9 GW — up about 80% from last year, with 100%-plus growth in Germany and 47% growth in the rest of the world.

And Reuters reported yesterday that solar is in for healthy second quarter earnings reports, adding that “several companies including First Solar (NASDAQ: FSLR) have said they sold out all their production for 2010.”

But they won't all be winners...

Even though Jeffries placed buy ratings on Trina Solar (NYSE: TSL), Yingli Green (NYSE: YGE), and JA Solar (NASDAQL: JASO), it noted that solar will be a stock pickers' game in late 2010 and 2011.

It advised waiting for “a better entry point” even on top picks while downgrading both SunPower (NASDAQ: SPWRA) and MEMC (NYSE: WFR).

A better entry point

As you can see in the chart above, solar stocks have been trending higher for the past month — high enough that I wouldn't risk buying just yet.

Germany, Italy, Spain, and a few other European solar markets are in the midst of changes to solar subsidy schemes. Jefferies notes that demand for solar is high this year as companies race to complete projects before subsidies expire.

The demand case for 2011 isn't as clear.

Nonetheless, the frenzy of solar buying this year is going to make for some surprise earnings reports to the upside.

Solar earnings season kicks off in earnest the first week of August.

You'll want to be buying the dips of solid solar companies in anticipation of good earnings.

Call it like you see it,

Nick

P.S. My readers love solar stocks as much as I do. Probably because we've closed 11 of them for double-digit profits since last July. Right now, we're up more than 75% on JA Solar (having bought it before the banks liked it), and we'll likely take profits on the coming earnings pop.

We're also going to be in place to profit from the other solar companies about to report second quarter numbers. But earnings season starts in a few weeks, so you'll want to join the thousands of other investors lined up for a solar windfall by then.

Goldman Sachs Says Go Long Solar Stocks

For all the perceived evil, you have to give them credit....

Goldman Sachs knows how to make money — lots of it.

In fact, they are so good at making money — for themselves and their clients — that for years they've been referred to in financial circles as 'Golden Slacks'.

It's rumored that they won't talk to you unless you've got $5 million to invest. And they only lend their name to the most exclusive high-end deals and initial public offerings. (They underwrote yesterday's Tesla IPO.)

Point is, Goldman is the best of breed of Wall Street banks. When they speak... the world listens.

And this week, they came out bullish on the solar sector.

Sooner than the Street expects

In a note to clients on Monday, Goldman said it sees “benefits from large-scale projects ultimately overwhelming near-term challenges and accelerating the transition from subsidized markets towards parity.”

More simply, the mass production of solar technology has created economies of scale, making once-expensive solar panels competitive with fossil fuels. Think Henry Ford and the Model T.

While locations with high electricity rates have already reached parity, Goldman thinks it'll be widespread as early as 2012. That's “sooner than the Street expects,” according to the note, citing utility projects in the U.S. and China.

And that's not even the good part...

Tell this to the next person who questions a profitable clean energy future: Goldman Sachs' official position is that higher-than-expected demand and price declines will deliver stable returns even without subsidies.

I repeat: even without subsidies.

Those aren't my words. They're the words of an elite investment bank with a storied history and a $136 share price; a firm that guides countless millionaires to even more profits.

Speaking of subsidies...

As the solar industry matures, subsidies will slowly be peeled away. That's how new technologies get established.

Already Germany is scaling back their generous solar feed-in tariff. It's already the largest solar market in the world because of it.

Recently, Spain announced it too would reduce its solar subsidy program. The details should be announced later this summer.

And just this week, Italy said it will reduce its feed-in tariff by 18%. (As an aside, my uncle is visiting from Italy this month, and he took great pleasure in telling me his son has installed both solar hot water and a solar photovoltaic system.)

We're witnessing the coming-of-age of solar right in front of our eyes. But not every company's going to make it.

Goldman's solar calls

Attached to the Goldman client note was a list of solar stocks and their analysts' opinion of each.

Here are the stocks they initiated coverage on, along with ratings and price targets:

First Solar (NASDAQ: FSLR): Buy rating and $150 price target
SunPower (NASDAQ: SPWRA): Neutral rating, $15 price target.
MEMC (NYSE: WFR): Sell rating, $9 price target.
JA Solar (NASDAQ: JASO): Buy rating, added to Conviction List. $7.50 target price.
Suntech (NYSE: STP): Sell. Target price: $8.40.

Factors for evaluation included margins, pace of cost reduction, strength of balance sheet, customers, and many others.

But this list hints at something bigger...

Last year, Suntech and some analysts were boasting it would soon be the largest solar company in the world by production. Now, its sell rating and sub-$10 price target show that high-volume production isn't all that matters.

Companies have got to reduce costs, foster customer relationships, enter new markets, etc.

And with the industry growing so fast, some simply aren't able to cut it. I expect we'll see some serious consolidation in the next few years.

And that's why I wrote this article from the grand ballroom in the Waldorf Astoria. I'm here at the Renewable Energy Finance Forum – Wall Street for the fourth year in a row.

The speaker list is top notch, and includes everyone from DoE officials to Goldman analysts to Google executives. It's only at forums like this that movers and shakers open up and reveal information usually kept under lock and key.

I always return with a handful of exciting new plays and angles, and this year won't be any different. So keep an eye out for my post-conference postings.

In the meantime, keep an eye on those solar stocks listed above. Many of them are well below their target prices.

My top pick is the same as Goldman's: JA Solar (NASDAQ: JASO).

The only difference? They just initiated coverage this week.

I got my members in one year and 40% ago.

Call it like you see it,

Nick

The Contrarian Case for Cleantech

It's always about this time — when world indices start swinging by hundreds of points — that the word contrarian enters the investment diction.

Of course, MSNBC and its peers giving contrarian advice offers a pretty good definition of irony. Following their advice won't do a bit of good if you're trying to separate yourself from the herd...

But as recent headlines and pundit banter have left me unable to avoid the topic, my curiosity grew.

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It may seem obvious enough, but I Googled it just to get the accepted definition.

Millions of Wikipedia users have given consent to the following:

In finance, a contrarian is one who attempts to profit by investing in a manner that differs from the conventional wisdom, when the consensus opinion appears to be wrong.

A contrarian believes that certain crowd behavior among investors can lead to exploitable mispricings in securities markets. For example, widespread pessimism about a stock can drive a price so low that it overstates the company's risks, and understates its prospects for returning to profitability. selling them after the company recovers, can lead to above-average gains.

Now let's take a step back, and dissect it from a bird's-eye view.

Consensus Opinion Appears to be Wrong

Here's consensus opinion on the value of public companies operating in the cleantech sector:

That's a two-year chart of the Market Vectors Global Alternative Energy ETF (NYSE: GEX) and the mnemonically splendid TAN, FAN, and GRID — the Claymore/MAC Global Solar Energy (NYSE: TAN), First Trust Global Wind Energy (NYSE: FAN), and First Trust Clean Edge Smart Grid (NASDAQ: GRID) ETFs, respectively.

The market thinks those funds are worth 60% to 80% less than they were two years ago. Even the Dow (^DJI) — the beaten down, battered Dow — did much better during that time.

Here's why that consensus is wrong...

First, the growth rate of past, present, and future global solar installations:

That's 2,177% growth from 2000 to today. Another 7,993% is expected through 2020.

Second, the growth rate of past, present, and future global wind installations:

That's 1,044% growth from 2000 to today. Another 279% is expected through 2020.

A few more things...

The solar industry is still in its infancy, with only 15,000 MW installed. There'll be more than 750,000 MW in a decade. Scale hasn't even been reached. Companies are still maturing. Venture capital is still being spent.

What's more, these charts show nothing of the coming growth in the geothermal, smart grid, water, green building, and other related industries.

To paraphrase Buffett, the best time to invest in a stock is when shortsightedness of the market has beaten down the price.

The long view looks pretty sweet. And I'd say the consensus opinion appears to be wrong.

Exploitable Mispricings in Securities

You've already seen this in the ETF chart above.

When weighed against present and future installs for solar and wind alone, the value scale seems to be severely miscalibrated.

And when you're well-acquainted with the stocks in the industry, it's easy to exploit that discrepancy in value. Have another look:

The solar ETF is down 20% in the past three months. But industry leaders like Trina Solar (NYSE: TSL), Suntech Power (NYSE: STP), and Canadian Solar (NASDAQ: CSIQ) are down even more — nearly 40% in some cases.

Being able to recognize and buy those kinds of unjustified dips is how my readers make serious money in the market.

It's what Buffett calls "buying fear," and it almost always leads to...

Above-Average Returns

It's how the Alternative Energy Trader can guarantee — and never miss — delivering 20 double-digit gains or more each and every year. We already have 3 for more than 100% this year.

It's how the Alternative Energy Speculator made it though 2008 without closing a single loser, closed 50 winners in 2009, and is well ahead of the Dow in 2010.

At the end of the day, there's really no such thing as contrarian; the term simply means buying low and selling high, which is what every investor is after.

It's just that, when everyone else seems to be losing their minds or their money, we needed a name for the people that could constantly make winning trades.

Keep an eye out for situations like the one I highlighted in the solar industry. They'll make you money every time.

Call it like you see it,

Nick

*Wind and solar growth charts from GlobalData.

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Why the Renewable Energy Sector Will Prevail

Follow me on a simple hypothetical mathematical journey, if you will...

Let's say there is global demand for 100 pieces of fruit, and that demand is being met in a variety of ways.

50 apples; 18 bananas; 20 oranges; 9 kiwis; 3 grapes.

Now let's say the apples gain market share and there are now 51 of them. On a percentage basis, the use of apples would grow by a scant 2%.

But what if another kiwi is added? On a percentage basis, the use of kiwis would grow by a more respectable 11%.

Now supplant apples with coal and kiwis with renewable energy...

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This is why renewable energy can grow so much faster than conventional fuels. And it's also why renewable energy can make you more money in the market.

Yet it's a notion the majority of investors fail to understand.

Numbers Don't Lie

In 2005 — just 5 years ago — there were 5,000 MW of installed solar capacity in the United States.

Today, there are more than 23,000 MW — a rise of 360%.

In 2005, there were just 9,000 MW of installed wind capacity in the U.S.; today, there are more than 35,000 MW — a rise of 289%.

Now consider this...

In 2005, the United States consumed 1.037 billion short tons of coal to produce electricity.

Today, we use even less than that (about 936.5 million short tons in 2009) for a loss of about 9.7%.

Here's the "ah ha!" moment...

Even though renewable energy (like the kiwis above) still accounts for only a small portion of our electricity needs, it is growing much faster than incumbents. That means renewables can make your money grow faster, as well.

In fact the use of coal isn't growing at all. It's shrinking.

So where do you want your investment dollars?

In the lumbering Goliath that can't get any bigger... Or in the David that has plenty of room to run?

Remember, solar and wind have grown several hundred percent in the past few years, but they still account for less than 4% of the mix.

By the time they're making up 10% or 15% of the mix, they will have grown several thousand percent.

And speaking of getting to 15%...

Legislation Doesn't Lie

As of this writing, 27 states and the District of Columbia have binding renewable portfolio standards (RPS), meaning utilities operating there have to generate a certain percentage of their electricity from renewables. Some are as high as 40% by 2017.

Another five states have voluntary targets.

It should be noted that states with federal representatives who oppose a national RPS already have targets at the state level. I'm looking at you Texas, Utah, and soon — as their House passes one this week — Oklahoma.

I've made this point before, but I still don't think people fully understand how much money it can make them...

More than half the states are now mandating the growth of renewable energy by law.

No other energy sources have this luxury.

This is an investment scenario most investors can only dream of.

And It Gets Even Better

Because as bullish as the renewables case sounds in the U.S., it's even more so in Europe and Asia.

Europe is several years ahead of us in the pursuit of clean technology. And Asia — specifically China — has blown passed us in the past few years.

China overtook the U.S. as the largest wind market last year; they now produce about 50% of the world's solar panels each year.

But keep in mind the David and Goliath example from above. Renewables may still account for only a small portion of the world's energy mix, but that allows them to grow much more quickly.

I know it's sometimes hard to see the forest for the trees, what with all the external factors weighing on the market...

But if you take a step back, it's easy to see how renewable energy firms are simply pounding the market.

Just look at a 5-year chart of solar leader First Solar (NASDAQ: FSLR) against Exxon (NSYE: XOM), Peabody (NYSE: BTU), and Chesapeake Energy (NYSE: CHK):

I'll say it again: Solar accounts for only a fraction of the global energy mix.

But on a market performance basis, First Solar and others are crushing the leaders of established industries like oil, coal, and natural gas.

I can't fully explain this trend in a short editorial, but this report does a great job of explaining why renewable are growing so quickly, and how the smartest investors are taking notice to make some of the easiest profits the market has ever seen.

Call it like you see it,

Nick

The Top Solar Companies to Watch

Over the years, we've made a boatload of cash on solar.

Take a look at a list of our top solar winners from 2005 to 2009:

2005 – World Water & Power Corporation (OTCBB:WWAT) – 53.34%
2006 – XsunX, Inc. (OTCBB:XSNX) – 312% gain

2007 – World Water & Power Corporation (OTCBB:WWAT) – 415.79% gain
2008 – First Solar (NASDAQ:FSLR) – 70.1% gain
2009 – Yingli Green Energy (NASDAQ:YGE) – 179.78%

We're still plowing through 2010, but our most recent solar pick that we alerted our Green Chip Stocks Premium members to is already up more than 20% in just one week.

And there's plenty more to come.

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Solar Is Cheaper Than Natural Gas!

With the full-scale integration of this company's technology, solar could actually become cheaper than natural gas.

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There's no doubt — even when the solar bears come out to play — that industry momentum remains strong for solar, especially in China and the United States. But this momentum is not being monopolized by the public companies from which you and I consistently profit.

In fact these days, it seems that some private solar firms are landing a heck of a lot more institutional money and government incentives than some of the strongest public solar companies in the market are.

Now typically, we only focus on public companies here at Green Chip. After all, we're here to make money — plain and simple.

But that doesn't mean we should turn a blind eye to the private solar companies that are making waves.

Let's face it: Just because these companies aren't publicly traded doesn't mean they won't have an effect on our picks.

So let's take a look at four solar companies that have done quite well at stealing the solar spotlight...

Solyndra

Using proprietary cylindrical modules and CIGS (Copper Indium Gallium Selenide) thin-film technology, Solyndra claims that it can provide the lowest system installation costs on a per-watt basis for the commercial rooftop market.

The company made headlines last year after it was announced that it would be the first company to receive an offer from the DOE loan guarantee for a $535 million loan.

Beyond the DOE loan, Solyndra has raised about $800 million in private equity, making it one of the most capitalized startups in history; the company has a ton of contracts, and its backlog passed $2 billion last year.

The company actually has an IPO planned, although last month, PricewaterhouseCoopers suggested that there was substantial doubt about Solyndra's ability to continue as a going concern.

While this is not uncommon for startups, the news didn't bolster support for the IPO. And because the company has landed so much funding, the bar has been raised. We'll see how it pans out.

Solar City

Solar City provides solar power system design, financing, installation, and monitoring services for homeowners, businesses, and government organizations.

In an effort to provide an affordable solar option for its customers, Solar City offers a solar lease program where a large upfront payment is not necessary. It also allows consumers to lock in on one rate, while utility rates continue to climb year after year.

This is a winning formula for expanding residential solar, and Solar City has garnered a lot of attention over the past year or so.

The company serves more than 500 communities in Arizona, California, Colorado, Oregon, and Texas.

Just two months ago, it created a $90 million fund with U.S. Bancorp to finance solar projects. In total, the two have collaborated on three separate funds to finance nearly $200 million in solar projects in the U.S.

Solar City also landed $60 million in financing for solar installations with Pacific Venture Capital, a subsidiary of PG&E.

It is not unlikely that this could be one of the most popular solutions for consumers wishing to go solar.

Nanosolar

Nanosolar is a developer of CIGS technology. The company has raised more than a half billion dollars, and last year began mass producing its CIGS solar cells and assembling them into modules at its German facility.

A couple of years ago, Nanosolar was getting a lot of media attention. However, reluctance to share data on its production processes and costs raised a few eyebrows.

But last September, the company issued two white papers about its technology, and also revealed some of the customers that contributed to its $4 billion worth of contracts.

Today, Nanosolar claims a solar cell efficiency of 16.4 percent (in the lab), which has been confirmed by the National Renewable Energy Laboratory.

Still, like Solyndra, a lot of faith and capital has been ponied up for this still somewhat mysterious solar outfit. So expectations are high, and skepticism remains strong.

We'll know more about how this one pans out later this year.

eSolar

eSolar is a developer of concentrating solar power (CSP) systems.

Using small, flat mirrors, heat from the sun is reflected to a tower-mounted receiver that boils water to create steam. The steam then powers the turbine.

This particular system is developed using mass-produced components and is designed for rapid construction and scalability. Essentially, this is a "pre-fab" CSP that allows for design and manufacturing efficiencies which offer significant cost savings.

The company made headlines earlier this year after it announced that it would be licensing its technology to Chinese electrical power equipment manufacturer, Penglai Electric. Penglai expects to build 2 gigawatts of CSP plants in the next ten years.

While eSolar does currently boast a 5 MW plant in Lancaster, CA, it's now focusing primarily on equipment manufacturing and licensing its technology. The feather in eSolar's cap is its software, which allows for the movement of its reflective mirrors (heliostats) so that the production of the heat is optimized.

eSolar was included in MIT's Technology Review's list of the world's most innovative companies.

The Next Great American Energy Company that Is Publicly Traded

There's no doubt that competition in the solar space is alive and well. And as long as the market demands increased efficiencies with decreased costs, we don't expect this healthy competition to disappear anytime soon.

And this holds true for all forms of new power production.

We still maintain that you'll get the biggest bang for your buck from those little-known, under-the-radar plays that the suits on Wall Street only report on after guys like us do all the early, heavy lifting.

But that's fine with me... Because this just allows us to get you in early, before the trend-chasers push these stocks up into the stratosphere.

It's how we've been profiting from day one, and it's how we'll continue to profit going forward.

In fact, my colleague, Nick Hodge has just posted his latest report on a new under-the-radar play that he's calling the Next Great American Energy Company. You can read more about that one here.

To a new way of life, and a new generation of wealth...

Jeff

Residential Solar Installers

It's once again time to take a look at the other side of solar.

Wall Street generally gives more attention to global companies providing cells and modules, but mounting policy advantages in certain states are making regional installers increasingly attractive.

At the federal level, everyone is entitled to a 30% investment tax credit for which the $2,000 cap has been removed. And the "10 Million Solar Roofs and 10 Million Gallons of Solar Water Heating Act of 2010" bill introduced by Sen. Bernie Sanders of Vermont would offer a direct rebate of $1.75/watt for PV systems, potentially offsetting another 25% of the cost.

Combined with the solar incentives offered in 19 other states, a homeowner could only be responsible for 25% of the total cost of a photovoltaic system.

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Special Financing

My colleague Chris Nelder recently reported on new financing schemes that are also allowing easier access to rooftop solar systems for homeowners:

A different approach uses private third-party financing to front the cost of a solar PV system to end-users, who then pay it off over 15-20 years or more.

In the commercial sector, companies like Solar Power Partners (SPP) and SunRun of California assume the initial installation cost and own and operate the systems in exchange for a power purchase agreement (PPA) with the customer.

Power generated by the system is sold back to the customer, typically at or below grid rates. At the end of the PPA term, the customer can buy the system at fair market value or renew their PPA.

These types of special financing are increasing demand by allowing homeowners to install PV who otherwise wouldn't have all the capital to do so.

And there are a few publicly traded solar installers poised to take advantage of this coming demand.

A Solar Installer With a Plan

SunRun (the company mentioned in the blurb above) has emerged as the nation's leading home solar service company, thanks to its revolutionary financing model. Here's how their website describes it:

With SunRun you purchase solar electricity instead of solar panels, which means that you don't have to burn through your savings to go solar. Most people can get started for as low as $1,000 down. It also means that you'll never have to worry if — or even how — your system is making power. We'll take care of your solar system. You go think about something else.

The man who found that company is named Nat Kreamer, though you won't readily find him on the website any longer...

And that's where it gets interesting for investors.

In April of last year, Kreamer was appointed to the Board of Directors of Lonestar Capital, which is now doing business as Acro Energy Technologies (TSX: ART.V).

He was named President of the company by June with CEO Harry Fleming saying, "Nat's experience in the solar industry will be invaluable to the Company. His expertise will help strengthen our operations in California and his strategic insights will help us grow across the country this year."

I bet it will.

Remember, SunRun's customer database is probably chock-full of homeowners who have applied for financing... just waiting to have solar installed on their roofs.

Not-So-Strange Bedfellows

So they tapped that asset. A strategic alliance was signed under which "Acro Energy and SunRun will offer solar electricity service agreements to residential customers and Acro Energy will sell solar electricity facilities to SunRun as a preferred solar systems integrator."

It's a match made in heaven. Here's what the new couple had to say...

Nat Kreamer, Interim President of Acro Energy (founder of SunRun):

The ability of homeowners to finance solar electricity systems is the single biggest hurdle for the solar integration market. Offering SunRun to our customers is a competitive advantage for Acro Energy. It should help us convert a significant number of currently contracted customers, who want an affordable solar financing option, into revenue.

Lynn Jurich, SunRun President:

Our relationship with Acro Energy will allow SunRun to bring affordable solar to even more homeowners in California. Together, we look forward to growing the number of homeowners who are getting clean energy and saving money.

Acro was the fifth largest solar integrator in California within a month. They're now the fourth largest by sales volume.

Here's how the stock has done against Akeena Solar (NASDAQ: AKNS), the largest integrator in California, since the alliance:

And conditions are right for continued good performance from this installer. Panels are cheap (below $2.00 for Chinese brand), demand is high, and there are good subsidies and financing mechanisms.

In fact, Acro's January year-over-year sales grew 118% according to a release on CNBC, which attributed the growth to recent acquisitions:

In 2009, Acro Energy acquired Acro Electric, Inc, Energy Efficiency Solar, Inc, and the assets of Light Energy Systems. The combined sales of Acro Electric Inc, Energy Efficiency Solar, Inc, and Light Energy Systems grew by 118% in January 2010 compared to their sales in January 2009, based on the number of kilowatts sold.

"We have successfully integrated our California businesses and leveraged them, via organic growth, to catapult Acro to the top tier of market," said Nat Kreamer, president of Acro Energy.

"We plan to capitalize on this success and expertise by expanding into other US solar markets in the first half of 2010," added Harry Fleming, chief executive officer of Acro Energy.

As a residential solar boom gets underway, you may want to consider adding an integrator to your to solar holdings. The action isn't always in cells and modules.

Call it like you see it,

Nick

Change Coming to German Solar Industry

On July 1, the training wheels will come off Germany's world-leading solar panel industry. Will investors stay for the ride?

The feed-in tariff (FIT) that the biggest economy in Europe has used to stimulate its domestic photovoltaic (PV) market for the past decade is about to be cut by double digits. That move is partly a response to complaints from some constituents and conservative politicians, but Chancellor Angela Merkel and her center-right Bundestag (German parliament) colleagues hope to maintain market dominance despite the changes.

Here's how the drafted FIT shift breaks down:

Rooftop solar PV installations will see a subsidy cut of 16%.

Ground-based modules installed in yards and other open, non-arable patches of land will be 15% less funded by the changed FIT.

PV projects at dumps and old army bases, which along with contaminated industrial plots are called "brownfields," are set for an 11% cut.

The most dramatic shift we can expect in the second half of 2010 is a complete elimination of incentives for large solar panel arrays on arable land. State news agency Deutsche Welle reports that farmers have been crying foul about investors snapping up fertile tracts to "harvest the sunshine." MP Peter Altmaier, a leader of Angela Merkel's own Christian Democratic Union party, insists, "There must be no more panels installed on arable land."

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Aside from that apparent inclination toward a total prohibition, the expected FIT changes for H2 are just that — expected.

Don't Believe the FIT Hype

Though the catchier headline may be to say that Germany's government is yanking the rug out from under its homegrown clean energy champion, the entire point of a feed-in tariff program is to phase the industry to grid parity with its fossil-fuel counterparts.

Coal and natural-gas fired power plants generate electricity for about 20 euro cents per kilowatt-hour. Under the FIT — which is set up to pay a premium for energy generated by photovoltaic panels (the same system can be applied to other sources) — Germany has already gone from a whopping 57 euro cents (c) per kWh in 2004 down to 39c now.

It's all part of a process initiated back in 2000, when the Bundestag passed its Renewable Energy Act. "Cleantech" hadn't dawned yet, and oil was far from record highs it reached later in the decade.

So Germany was ahead of its time and has reaped the benefits of a steroid-injected clean energy economy. Berlin's goal was always to wean producers and installers off the government juice, and that's what we're seeing now.

The come-down hasn't caused the German solar industry to fall flat on its face. Rather, companies like Q-Cells — whose facilities I toured in summer 2008 — are staying on their toes.

The FIT plan will be taken up again on Friday, at which point investors will have a more certain basis for what to do with their money. In the meantime, shares of Q-Cells (Frankfurt: QCE) rose on Tuesday, February 23, a day after draft FIT changes leaked.

Q-Cells investors turned bullish after the company announced that at the end of 2009, its cash position was nearly 65% better than they anticipated.

That stockpile leads me to believe that German solar companies are padding themselves for a blow. Their dominance as producers is due to the size of the market that was created by government mandates, not the other way around.

For installers at all levels — household, commercial, and large-scale "solar farm" developers — now is the time to get capacity in place.

Q-Cells says it's sold out of panels for the first half of 2010, and analyst reports I see every day from solar power suppliers around the world (especially China) indicate that nearly all shipments are being directed to Germany to feed the frenzy. That shift in focus for the first half of 2010 is going to be one of many in the full year and years to come.

German FIT Changes Spread Far and Wide

It costs about 1 billion euros per month to subsidize new solar schemes, and relief for rate-payers must be part of the political calculation going into the finalized FIT cuts. However, the government maintains its target for 66 GW of solar power capacity by 2030 — up from 9 GW today.

Gordon Johnson of Hapoalim Securities thinks the less-than 3 GW per year growth that the 2030 target implies could set solar stock buyers up for a fall, since analysts have based estimates on higher annual increases.

The fact of the matter is that even German companies aren't putting their eggs in one basket these days. If anything, the government has done German solar panel producers the favor of forcing diversification.

The Desertec initiative to get 15% of Europe's electricity from North Africa by 2050 is being led by ten German companies, and in mid-February, Desertec CEO Paul van Son contrasted that undertaking with Germany's rural unrest over solar.

"There's a vast amount of sunshine" in North African countries like Morocco, Tunisia, and Algeria, points out van Son, "and there are vast amounts of space."

Germany is big, but of course it's much more fertile than the Sahara, and no one will tell you it's sunny.

On the other hand, Italy is making long strides toward grid parity between its solar capacity and fossil-fuel plants by virtue of its Mediterranean climate. Look for that country to draw some of the salespeople out of Germany after July.

The point is that international solar power companies — from polysilicon providers up to module makers —all have their heads on a swivel right now. Average sales price (ASP) will be a concern as any national subsidy cut directly affects the money being pumped in from the top.

Long-term solar power bulls are in a good position here, as some stocks and funds like the Claymore/MAC Global Solar Index ETF (NYSE: TAN) appear oversold.

Here we see TAN's performance over the past six months, with a couple of my favorite technical indicators on top:

The Williams Percentage Range indicator gives a heavily oversold reading, and TAN is breaking below its lower Bollinger Band. You can see that the last time W%R was at this level, we didn't see a recovery... but reports about the German FIT were coming in unfiltered flurries at that time.

Now, we have more information, and it's reasonable for investors to look ahead at how companies will adjust to new subsidy conditions, rather than just freaking out and running for the exits.

I'll get back to you with even more complete information next week after the Bundestag session takes the FIT changes from rumor to reality.

Regards,

Sam Hopkins

International Editor

Renewable Energy Legislation

Dear Reader,

By now you know that Green Chip International Editor Sam Hopkins likes to go beyond headlines and straight to what's really making clean energy stocks tick. For him, the story isn't always what stock led a day's cleantech trades or which country put up the most wind turbines in a year. Last week, he brought you an exclusive interview with Iceland's energy authority chief.

Today, Sam is drawing attention to some unsung heroes of the worldwide renewable energy rollout: lawyers.

Good investing,

Jeff Siegel

Publisher, Green Chip Stocks

—————

Why Lawyers are Essential to Cleantech Success

Justice may be blind, but lawyers always have to see clearly. And recently, I've met some legal eagles whose sights are fixed squarely on cleantech.

One Israeli-American law firm is focused specifically on assisting companies that can use both Israel and the United States as bases for global success. ZAG/S&W stands for Zisman, Aharoni, Gayer & Ady Kaplan & Co./Sullivan & Worcester LLP, hence the initials. There's no abbreviation in the joint practice's binational operations, though. Water Resource Development and Renewable Energy & Energy Efficiency each have teams of attorneys tasked with finding opportunities here in the U.S. and in the Middle East's leading economy.

Now, to understand the pivotal role that attorneys play in fostering the kinds of Green Chip Stocks that give this publication its name, we need to explore a sort of paradox in the way the clean energy economy is developing...

The global green energy rollout is both high-tech and grimy as heck.

We have NASDAQ-listed power switch companies like Fairchild Semiconductor (NASDAQ: FCS) and blue-collar job machines like Denmark's Vestas Wind Systems (COP: VWS). Intense work is being done right now to connect new renewable power generation to electricity customers and to get next-level fuels into vehicle tanks. Blowtorches are joining pipes and tiny soldering irons are creating data pathways for all of the heavy-duty stuff to run more efficiently.

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For me to really register what's fueling all the anonymous-looking share price charts and market projections I see, I pay periodic visits to fabrication plants and sites where clean energy capacity is being installed.

But there are plenty of people in suits making this all happen, too. Lawyers go through everything with a fine-toothed comb to bring startups to public listings, and there's plenty of elbow grease and heavy lifting on their end.

Heavy Legal Lifting to Bring Cleantech to Market

On Capitol Hill during last fall's ACORE Phase II Renewable Energy Policy Forum, I sat in a room full of well-dressed listeners who were ready to pounce on new legislation as the basis for business. Simply put, everyone was there to find out more about how the U.S. renewable energy market is growing with government help.

I even ran into Matthew Lesko, the guy in the question mark suit who beams on TV about how to get free government money to start a company, go to school, or learn to throw left-handed... He was there for hot tips for readers. And I was there for you readers, who expressed appreciation for a look behind the scenes.

At the Retech conference a couple of weeks back, I took the opportunity to follow up on that policy pow-wow with Jeffrey Karp, a partner in ZAG/S&W's Washington office. He deals with environmental and natural resource issues specifically, steering clients through new and pending legislation like the EPA's finalized Renewable Fuel Standard (RFS2).

Congressman Ed Markey (D-MA) told us at the Phase II Policy Forum that his goal is to create a "Darwinian, paranoia-inducing marketplace" through legislation. For that sort of competitive environment to come to full flower, the participants need to know the rules.

Jeffrey and his partners have to stay on top of cap-and-trade developments, RFS2, and the SEC's recent guidelines on how public companies report the money they spend on climate change risk mitigation.

As these groups of attorneys move, they hack through the legal brush and blaze trails for technology licensing deals, joint ventures, venture capital money, and mergers and acquisitions to pass through.

Take Plasson, Ltd., an Israeli company that makes plastic pipe fittings. Plasson's 1000+ products are used in wastewater processing, mining offtake, and for routing telecommunication cables. Plasson used ZAG/S&W's consulting to snap up a 77% stake in Industrial Pipe Fittings LLC, which is based in Texas.

Or take Madgal, the 30 year-old Israeli company bringing computerized high-end smart faucet designs from the Middle East, where water scarcity is a fact of life and bone of geopolitical contention, to showrooms, bathrooms, and kitchens in the U.S.

Karp's team is making sure that Madgal has its i's dotted and t's crossed so it can get down to business. That means entering into partnerships with local companies to expand Madgal's market reach.

The Sun is Shining on Israeli Cleantech

Many of the companies Jeffrey Karp and his colleagues are involved with are based on kibbutzim. A kibbutz is a type of cooperative settlement unique to Israel, and each one of the nearly 300 of these communities scattered around Israel has a central way of generating money. For some it's dairy (Yotvata); for others it's sandals (Teva/Naot). And now for a growing number, cleantech is the key to prosperity and a high communal standard of living.

Although the kibbutz is essentially a socialistic concept, capitalist tendencies are driving more and more kibbutz-based companies like Madgal to seek out export opportunities.

Others — like Kibbutz Ketura's Arava Power Company — expect to benefit from Israel's own national clean power goals. Located in Israel's arid Negev Desert, very near the border with Jordan, APC has signed up neighboring communities for a photovoltaic network totaling 100 megawatts. I profiled Arava Power back in 2007, long before their recent financing field day.

German engineering conglomerate Siemens has stepped in with $15 million for Arava Power, which amounts to a 40% stake. The Israeli government is encouraging the development of utility-scale solar power at home, though its goal of 10% clean energy in electricity by 2020 falls far short of European and many U.S. state targets.

Even given diminutive national goals, Arava's attorneys obtained the licensing they needed to gain the lead in the domestic market. Feed-in tariffs are coming into play in Israel to stimulate wind energy and small PV power plant development.

And the fact of the matter is that solar is not new to Israel. 95% of the homes in Israel have rooftop solar thermal water heaters, which have been mandatory since 1980. As Eco Energy Ltd. head Dr. Amit Mor told us at Retech, those existing installations are far more basic than what Israeli solar power engineers can do today.

Israel now has a number of technology incubators, where budding biotech firms and clean energy power generators can find initial financing and access to resources, as well as attention from venture capitalists and legal shepherds like ZAG/S&W.

The big dogs — like Ormat Industries, parent of Ormat Technologies (NYSE: ORA) — are developing their own solar arrays to explore utility-scale possibilities to boot.

From idea to market, there are plenty of pitfalls that can be avoided with a good map. Attorneys are the ones doing recon for the Israeli companies on their way toward public listings. Since we're tracking them now, we'll be sure to bring you the latest.

Regards,

Sam Hopkins

China's Clean Energy Progress

Every so often, the Green Chip team is asked to provide insight about the cleantech industry to national magazines and other media outlets. Next month, Nick Hodge will be featured in SFO Magazine, covering China's growing presence in the space. Here's a sneak peek at his article before it hits the stands.

Enjoy,

Jeff Siegel
Managing Editor

The United States is rarely referred to as a silver-medal nation. But that's exactly what we're becoming with respect to the race for clean energy.

There's been progress on domestic soil to be sure. Installed wind capacity has grown over 900% since 2000. Solar installations have kept similar pace.

But there's an unexpected place where clean technology is being deployed at a more rapid rate. A place often condemned for its perverse pollution; a country often decried as the world's biggest emitter of greenhouse gases (GHGs): China.

Enter the Dragon

As the U.S. continues its polarized debate around cleantech policy — diddling with implementing some type of carbon pricing, a federal renewable energy standard (RES), and a way to streamline large projects — the Chinese have quickly lept to a leadership position in the industry.

In 2006, they passed an RES calling for renewables to comprise 15% of the energy mix by 2020. But Shang Xiaoqiang, vice chairman of the country's National Development and Reform Commission (NDRC), recently said capacity could grow to 20% by that time.

Studies also show that by 2020, China could actually install three times its 30 gigawatt (GW) wind target. And they'll meet their 2020 solar target of 1.8 GW next year.

The U.S. hasn't even set national targets, so meeting or beating them is a moot point.

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And when it comes to government investment, the Chinese have long pulled away. Our Recovery Act called for $80 billion to be invested in the sector. China has announced $217 billion for the next five years, and could invest upward of $650 billion in the next decade.

One recent report claimed they're spending $12 million per hour ensuring they emerge on top.

For the U.S., 'losing' could quickly turn into 'lost.' Fortunately for investors, stock exchanges are border agnostic.

The Cleantech Arms Race

In a very real way, democracy is hindering the States' deployment of cleantech assets. The infamous Cape Wind project has been stymied because it'll "ruin the view." Massive utility-scale solar installations in southwestern states have been delayed on behalf of reptiles.

And that's without mentioning the see-sawing in Congress as lobbyists on both sides of the issue wield their well-funded swords. A recent Reuters report succinctly noted:

Beijing's top leaders have made clear their intention to have their nation dominate this new industry, up and down the value ladder. And in their quest for the prize, they are not burdened by concerns facing their Western counterparts — such as the impact of wind turbines on landscapes, higher energy prices for consumers, or investor returns.

Our leaders' inaction has not only delayed development of what could be a trillion-dollar domestic market — not to mention energy independence — but they've forced companies within that market to tread water by providing inconsistent incentives and policy guidance.

The evidence of this is abundant. But the issue really came to the fore when a Chinese company, A-Power Generation (NASDAQ: APWR), was selected to provide turbine parts for a $1.5 billion U.S. stimulus-funded wind farm in Texas.

Politicians on both sides cried foul before A-Power announced it would build a manufacturing facility in the U.S. that will employ 1,000 workers while cranking out parts for wind turbines.

So it's not only difficult for U.S. companies to get ahead, it's increasingly easier for China-based cleantech companies to row their boats ashore.

Made by China

China's laser-like focus on cleantech has thrust them squarely into a global leadership position.

Last year, Chinese companies produced about 50% of the world's solar cells. And that's likely to rise to 70% in the next few years, as costs continue to fall more quickly there than in Europe or the U.S. In fact, firms based in Germany — the cradle of the modern solar industry — have been finding it's cheaper to buy from the Chinese than it is to make their own solar cells.

And they're not just ramping up production; solar installations are also on the upswing. China will meet its 2020 target of 1.8 GW next year, and Greentech Media is forecasting installed solar capacity could actually hit 10 GW in the next decade, implying a 450% expansion.

Wind energy is witnessing a similar scenario. The Global Wind Energy Council (GWEC) has reported that China "doubled its entire installed capacity each year since 2005." Last year, they became the largest wind market in the world, installing 13 GW compared to 10.5 GW in Europe and 9.9 GW in the U.S.

That growth is largely due to a booming Chinese wind manufacturing market. Producers like Sinovel and Goldwind are already top ten globally, and could soon threaten companies like GE and Suzlon that currently inhabit the top five.

The Chinese cleantech production model is so robust that it's now being exported around the globe, in much the same way that other Asian countries have taken automobile manufacturing abroad.

A-Power — the company awarded part of a U.S. stimulus-induced wind project — is already setting up manufacturing on U.S. soil. Yingli Green Energy (NYSE: YGE) has announced plans to build a solar manufacturing facility on U.S. Turf; so has Suntech Power (NYSE: STP).

And, in the most revelatory example of all, the Wall Street Journal has reported that "Duke Energy Corp.(NYSE: DUK) is in talks with State Grid Corp., China's biggest electricity distributor, over a joint venture that may involve cooperating on power transmission lines in the U.S."

While we were distracted by health care, Tea Parties, and executive pay, China quickly pounced on what is proving to be the most vital and valuable industry of the 21^st century. They've mastered the production side and, as the Duke example highlights, they're moving on transmission as well.

Our energy assets of tomorrow may not be made in China, but it looks like they'll made by China. And, as you can imagine, Chinese cleantech success is also apparent in public markets.

Rated to Outperform

Here in the States, First Solar (NASDAQ: FSLR) is by far the most recognizable solar name. The company still boasts one of the lowest costs per watt and highest efficiencies for thin film solar. But First Solar, too, is losing ground as Chinese firms continue making inroads. The stock is down nearly $200 from its 2008 high over $300.

The same holds true for Germany's Q-Cells, one of the largest solar cell producers in the world. The growing Chinese advantage in both cost and scale have led to a huge discrepancy in prices for stocks that share the same peer group, as companies like Trina Solar (NYSE: TSL) and Canadian Solar (NASDAQ: CSIQ) have pulled investors away from traditional solar stocks.

That trend is being mirrored in the wind industry, where protectionism has forced billion-dollar development costs to remain on the balance sheets of Chinese companies. Though industry stalwarts like Vestas (COP: VWS) and Gamesa (MCE: GAM) are knocking hard on the door, failure to penetrate the Chinese market has caused investors to look elsewhere for wind-blown returns.

Most analysts and industry insiders — myself included — don't see this trend abating anytime soon. Feed-in tariff (FiT) cuts for cleantech in Europe, though a sign of industry maturation, are driving sales higher in China as installers race to buy turbines and panels at the lowest cost before subsidies are cut later this year.

And the lack of long-term policy guidance in the U.S. is forcing cleantech companies here into a holding pattern, hesitant to invest in new manufacturing capacity or asset deployment with uncertainties still rampant with respect to the tax code and incentives. With price parity still not reached, renewable energy developers sometimes don't even know if there will be an end buyer for their electricity.

China, on the other hand, passed a law last year requiring grid operators to buy all the electricity produced by renewable resources. What's more, the Chinese cost advantage is leading to rebranding, wherein a company like GE buys solar panels from a second-tier Chinese company and sells them as their own.

This is paving the way for many companies you've never heard of to emerge as global players. Yingli, JA Solar (NASDAQ: JASO), Renesola (NYSE: SOL) and others are already becoming household names. Yingli is even sponsoring this year's FIFA World Cup.

The initial public offering (IPO) market is also flooded with Chinese entrants. Blade maker HT Blade, polysilicon producer Daqo, and wafer maker JinkoSolar have all already filed.

Indeed, it looks like the global cleantech game will be dominated by Chinese players for the foreseeable future. And that's a vast departure from standard practice, where China has typically trailed European and U.S. companies in entering nascent industries.

In a recent talk at an industry conference in Washington D.C., President of GCL Solar Energy Hunter Jiang didn't mince words about his country's position. His company is now the third largest producer of polysilicon in the world. After ruminating on China's laggard position throughout modern history's industrial revolutions and commenting on how automobiles and computers were cradled elsewhere, he said, "Today we are the leader."

Call it like you see it,

Nick

P.S. Solar and wind aren't the only sectors being dominated by the Chinese... one small company is about to make a big splash in the battery arena. Its batteries are already in nearly every power tool in China, and soon they'll be in every hybrid the Middle Kingdom churns out. Some analysts — Berkshire's Charlie Munger included — say it's one of the best cleantech growth companies around. You can learn all about it in this new report.

The Rooftop Solar Market

Distributed generation of renewable energy is off to a rocky start, but it's finally making some headway.

The research side is looking good. The $28 billion request in the president's FY 2011 budget for the DOE Office of Energy Efficiency and Renewable Energy includes large increases for programs including wind, weatherization, smart grid technologies, and solar — plus $58 million for National Renewable Energy Laboratory (NREL) infrastructure and $50 million to stimulate clean energy education.

An additional $300 million would support the Advanced Research Project Agency — Energy (ARPA-E) initiative. Modeled after the DARPA program that resulted in the Internet, ARPA-E will fund the fundamental research to incubate the energy grid of the future, what Ethernet inventor Bob Metcalfe termed the Enernet.

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Grid investment is coming along well, with $75 million allocated to it in the budget request, plus $40 million toward grid storage solutions. It's a relatively paltry amount, but it should be bolstered soon by major grid reform legislation making its way through Congress.

The production side has become a bit of a buyer's market, yet manufacturers are still building new capacity in anticipation of the boom ahead. Yes, China is building more capacity in the U.S. than American companies are, but as I have argued previously, that's fortunate given the urgency of our situation. Solar PV supply is high and prices are as low as they've ever been, which is constructive for new installations.

Overall, I would say we're making progress on the hardware front. But then it's easy to throw money at hardware.

The real problems now are in finance and policy. The big up-front cost has always been the main hurdle to distributed generation (and rooftop solar in particular), but now several ways to overcome it are available.

10 Million Solar Roofs

At the federal level, we have the "10 Million Solar Roofs and 10 Million Gallons of Solar Water Heating Act of 2010" bill introduced by Sen. Bernie Sanders of Vermont, which was modeled after the California Solar Initiative (Ahnold's "Million Solar Roofs" program).

A direct rebate of $1.75/watt for PV systems and $1/watt for solar hot water would offset somewhere around a quarter of the project cost. Combined with existing 30% federal investment tax credit (ITC) and state incentives where available, it could bring the end-user's cost down to 25% of the actual retail price. The $2-3 billion price tag of the bill will be hard to swallow... but if it passes, it would be a major shot in the arm for rooftop solar.

The more interesting solutions, however, are at the local level.

PACE

Under a fairly new type of program called property assessed clean energy (PACE), local governments float bond issues secured by real property in their districts and use the proceeds to fund renewable energy and efficiency projects. The property owners then pay back the debt as special assessment included in their property tax bill over 20 years.

As an example, $12,000 in financing through the program would translate to roughly $75 a month in payments. If the property is sold, the energy systems and the tax obligation remain with it.

PACE is offered by Oakland-based Renewable Funding and has been implemented in three counties and three cities in California, including San Francisco, Los Angeles, San Diego, and Sonoma.

A statewide program expected to commence this year. San Francisco's program was approved this week and will offer $150 million in bonding capacity. Fifteen states have adopted PACE programs over the last year and a half, and interest continues to grow without discernable opposition.

Contributing to the popularity of PACE is that it's a voluntary program that only affects property owners who choose to participate, and that it applies to a wide range of measures in addition to rooftop solar.

Third-Party Financing

A different approach uses private third-party financing to front the cost of a solar PV system to end-users, who then pay it off over 15-20 years or more.

Power generated by the system is sold back to the customer, typically at or below grid rates. At the end of the PPA term, the customer can buy the system at fair market value or renew their PPA.

SPP's targets include water districts, wineries, universities, airports, and other large facilities. Their current portfolio stands at about 14 MW, which is tiny compared to a single 500-1,000 MW coal-fired plant... But I see potential for robust growth in such financing options.

Cutting the out-of-pocket expense to zero makes solar PV a no-brainer for any facility that wants to produce some of its own power and lock in fixed power prices. (If they know anything about the future of energy, they should).

The private capital behind the strategy gets a 5% annual rate of return (or better) at nearly zero risk by assuming the 30% ITC and taking ownership of a producing, hard asset.

When lines of credit shrunk or dried up altogether in the Great Credit Drought of 2008-2009, solar installation companies turned to private capital as well. Companies like Geoscape Solar of New Jersey and SolarCity of California offer financing options with zero upfront cost under PPAs and lease arrangements to the residential and small commercial market.

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FITs

Feed-in tariffs, or FITs, have proved the world's most effective incentive for rooftop solar and distributed power, typically offering customers three to four times the grid price for kilowatt-hours they generate. FITs are financed by incorporating their cost into grid power prices across the board, resulting in a very modest price increase for all customers.

The FIT in Japan was so successful that it is already being phased out.

The German FIT captured half the world market for solar modules in roughly five years, reached its target early, and is now accelerating its schedule for declining tariffs. Studies have already shown that the program has actually reduced the fully-considered costs of delivering power to the country, and Green Chip International readers have tapped companies from both inside and outside of Germany that generate earnings as German rate-payers benefit.

Spain's FIT was fully subscribed in short order, then fell victim to a federal budget shortfall as Spain descended to become the S in PIIGS — the nations at risk of sovereign default that have been rattling world markets recently.

A new FIT for the UK has just been announced which will pay 41 pence initially — as compared with a standard grid price in the 10-12 pence range — for production from residential-sized generators including PV, wind, micro-hydro, and biomass. The tariff depends on the technology and is inflation-indexed.

In the U.S., the failure of the federal government to offer a FIT has prompted states and a few cities to try creating their own equivalents. Unfortunately, it's a regulatory path fraught with peril because the Public Utility Regulatory Policies Act (PURPA) of 1978 forbids states from setting tariffs above the "avoided cost" of generation from other sources, like conventional natural gas-fired plants.

As the excellent summary by Paul Gipe explains, a new report (actually a long legal opinion) from NREL lays out two legal paths states can take.

One is to lard the tariff over and above the avoided cost with revenue from renewable energy credits (RECs), subsidies, and tax credits, which fall outside the Federal Energy Regulatory Commission's (FERC) jurisdiction.

Alternatively, in the handful of states where ownership of distribution and generation are split, utilities may offer higher tariffs for solar PV voluntarily... but the opportunities under this strategy are few.

The other practical path is for FERC to exempt generators under 20 MW from PURPA. The California Energy Commission has asked the state to seek a clarification from FERC on this point, and it seems likely that other state regulators will join that effort.

Since PURPA was written over three decades ago before the age of renewables began, this seems a reasonable fix to the problem. Rep. Jay Inslee of Washington has proposed the necessary changes to the law, but unfortunately they are tied up in the Waxman-Markey climate change bill, which is going nowhere fast.

The pieces are now — or will soon be — in place to enable an explosion of distributed renewable energy in the U.S. It has the technology, the financial mechanisms, the public sentiment, and the right cost of entry: zero. It will not be stymied by musty regulations, utility opposition, or even the recalcitrance of banks.

Solar manufacturers, smart grid players, progressive but risk-averse capital, and most of all the public stand to benefit handsomely.

Until next time,

Chris

Spain's Solar Power Market Meets Morocco

Today, I want to expand on Spain's role in the global renewable energy boom.

You'll remember that last week I detailed the role of Spanish investors and companies in Peru's clean power expansion. As it turns out, Spain is fast becoming the hub of not only a trans-Atlantic but also a trans-Mediterranean green energy economy.

Spain's investment in South America is nothing to sneeze at, and neither are its results. Latin Business Chronicle reports that Spanish lender BBVA (NYSE: BBV) is banking on expansion of its Western Hemisphere operations to keep it growing. The bank upped its income from countries like Colombia, Chile, and even Venezuela, helping to offset weakness back in Spain where the recession has hit construction and other industries hard.

While at home the going is still tough for Spain's #2 bank (and really any bank that isn't boosting earnings by cannibalizing its own recommendations), BBVA's overseas outposts provide a glimmer of hope about future earnings for execs and investors.

For the Spanish renewable energy industry, there's a market much closer to home that we expect to provide megawatts worth of opportunities in the next few years.

I'm talking about Morocco.

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More Energy for the Land of the Moors

Morocco lies just across the Strait of Gibraltar from Spain, but it's a world away economically. Spain's economy is over 19 times the size of Morocco's, and because the industrial base is so much stronger on the Iberian Peninsula (also including Portugal), Spain consumes 10 times the amount of power that Morocco does.

The only reason Spain doesn't eat up the same proportion of power as its GDP would suggest is that Morocco's energy intensity (usage per unit of GDP) is highly inefficient.

Despite the current disparities between the two countries — or maybe because of them — in 2010, we will see Morocco take the baton from Spain in solar power generation plans against a backdrop of previous Spanish strength in the sector.

Over the past several years, the Spanish government in Madrid stimulated the global market for solar power modules and components with attractive subsidies. The goal with such incentives is to guarantee residential and commercial solar power customers that they won't hemorrhage money from high-cost installation and panel prices. Instead, feed-in tariff (FIT) plans for solar PV in Spain and Germany, and for wind energy in Denmark, effectively bring clean power technology down to coal or natgas prices.

In 2008, Spain saw solar power capacity jump by 380% over 2007 as the national subsidy quintupled, but at the end of that year Madrid hit the brakes. Spain dialed down its solar subsidy, put a limit on the amount of sun power it would subsidize (500 MW per year), and effectively gave whiplash to worldwide suppliers and module makers like Germany's Q-Cells and China's Yingli Green Energy (NYSE: YGE), who had expected a hungry Spanish solar market for years to come.

So many assumptions came crashing down in late '08, as the credit crisis shocked companies into deep job cuts, investors ran from the market's falling knife, and politicians looked for any tourniquet they could find.

Over a year after the you-know-what hit the solar panel, Morocco, which imports 95% of the energy it uses, is launching a bidding round to start building 500 MW in concentrating solar power (CSP).

Moroccan Energy Minister Amina Benkhadra announced that the first bidding round to build and supply the solar plant at Ourzazate will be held in late February, just over a month from now.

That auction could put Spain in the driver's seat as a primary producer rather than a primary consumer of solar power products.

Empty Land, Full of Promise

One downside of large-scale solar power that its detractors like to point out is just how much land a major array takes up. Yet the desert Southwest of the U.S., Spain's southern desert regions just across from Morocco, and Morocco itself possess vast, virtually uninhabitable areas where solar power plants make sense.

Though Morocco won't get to 500 MW overnight, the country's goal of drawing 38% of its power from five local solar projects will in turn draw money and technology from around the world. Japan — one place where they don't have much land to play with, let alone sun-soaked deserts — is putting up $7.4 million for photovoltaic plant in Morocco. That announcement came along with commitments to up Japanese involvement in water access and rural electrification in Morocco.

Greentech Media reports that Spanish companies Cuantum Solar, Siliken, and Fotowatio are moving into the U.S. market to offset domestic weakness, and we're sure those firms are willing to hop the ferry over to Morocco for new business, too.

Let's not forget that even though Morocco gets lumped in with the Middle East, North Africa is a distinct region with history and potential. At this week's World Economic Forum in Davos, Switzerland, Francis Beddington of emerging market investment house Insparo Capital told Reuters, "Not investing in Africa is like missing out on Japan and Germany in the 1950s, Southeast Asia in the 1980s and emerging markets in the 1990s."

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Morocco's primary industry is textiles. It won't get anywhere beyond being the European Union's poorest southern neighbor without energy. Spain has the practical and political expertise to get Morocco off the ground and even make it part of the EU's Desertec plan to draw 15% of continental electricity from North Africa by 2050. The grid linkup technology is there (high voltage direct current HVDC), and so is the resource.

You can take a peek at the future in this Desertec map from the Club of Rome:

From Brazil to Japan to Israel, Spain, and Morocco... it's time to tie all these international experiences in together for comprehensive energy development action.

Regards,

Sam Hopkins
International Editor

P.S. From February 3-5, Nick Hodge and I will be at ReTech, the premier technology conference and exhibition in Washington, D.C. There, I'll be focused on the "International Markets and Competition" track, one of six different "courses" over 5,000 attendees will follow to get updates on the state of the global industry.

I'm looking forward to catching up with old company contacts and meeting new ones, as well as getting a clear picture of how different regions and companies are adjusting to tough financial conditions to keep their clean energy progress rolling. You read my report from the ACORE Phase II Renewable Energy Policy Forum direct from Capitol Hill this fall, and I expect the info from ReTech to be just as vital for investors. There are still spots open if you want to attend ReTech. Find out more here.

The Clean Energy Battle: U.S. vs. China

A word of advice to the developed world: stop making China the climate scapegoat.

I might even broaden that advice to include emulating the Middle Kingdom in some ways.

You see, the developed world is always quick to point out China's vast emissions and lackluster approach to sustainability.

I would submit to you, though, that in many ways the U.S. falling drastically behind its Asian counterpart when it comes to numerous issues involving emissions and the adoption of clean technology.

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The Emissions Thing

It's generally been the United States' position that China should commit to reducing its emissions as prerequisite to domestic action.

What we (as a nation) fail to realize, however, is that per capita (the amount of emissions per person), emissions in China are far less than in the U.S. And if that surprises you, wait 'til you see these other comparisons...

Both China and the U.S. have set emissions goals for 2020:

The U.S. has proposed a 17% cut in emissions from 2005 levels
China has proposed a 40% to 45% reduction in carbon intensity (per person) from 2005 levels

The World Resources Institute has said those two efforts would have about the same outcome.

But here's the kicker: China's goal is official policy. Ours is simply a goal announced by the White House, though the EPA now has the authority to act independently.

So who's more committed?

The Energy Thing

Last year, China got 9% of its energy from renewable resources. It has committed to raise that number to 15% by 2020. But recent reports show that if the current expansion rate continues, solar power alone could reach five or ten times the 15% target.

The most recent U.S. data comes from 2007, when we received 7% of our energy from renewable resources. A 15% by 2020 target has been passed by the House, but the Senate has yet to act. If passed, state governors could reduce the target to 12% if they increase efficiency targets.

Who's more committed? Who's making more progress?

The Efficiency Thing

Three years ago, China pledged to improve energy efficiency 20% by 2010. They are on target to reach that goal and to create a more stringent goal for 2020.

The U.S. — while committing a few billion for efficiency projects in the stimulus — has set no firm targets. The Waxman-Markey bill that has passed the House mandates a paltry 5% by 2020.

Who's more committed?

The Auto Thing

After a big U.S. push to increase Corporate Average Fuel Economy (CAFE) standards, the blanket target efficiency is 35.5 miles per gallon.

China is also beating us in this arena: in 2008, average fuel economy for new cars was reported at 36.7 miles per gallon.

The Disclaimer Thing

Of course, I can't put forth such a rosy Chinese sustainability picture without a few caveats.

The country is building coal plants at an alarming rate.

China is home to some despicable industrial practices that cause dangerous levels of chemical pollution.

And yes, they are the world's leading overall emitter of greenhouse gases, with dangerous levels of pollution still clogging numerous cities and rivers. (We'll get to their behavior in Copenhagen in another article.)

So yes, there are still serious problems in China... but we can't ignore the positive steps they're taking to address them — nor can we ignore the profit implications those steps will have for green investors.

The Reality Thing

The reality is pretty scary.

Think back a decade, to the height of dot-com expansion. Who were the leaders?

Sun Microsystems. Yahoo!. Google. eBay. Amazon. All U.S.-based companies.

Now think about the present day...

My best gains this year came from Chinese companies. And they came from multiple sectors.

Chinese solar producers are undercutting their European and American counterparts. Companies like Canadian Solar, Trina Solar, Suntech Power, and JA Solar have begun to show great strength.

The Chinese wind industry has also turned into a juggernaut, with multiple multi-gigawatt projects announced or under construction. American Superconductor (NASDAQ: AMSC) has been the way to harness those strides. And what about A-Power's (NASDAQ: APWR) monster run?

The Middle Kingdom has also become a breeding ground for battery and electric vehicle companies. Hong Kong Highpower (NASDAQ: HPJ) and China BAK Battery (NASDAQ: CBAK) have offered legendary gains this year.

It's hard to find a cleantech sector without at least one dominant Chinese player.

We should all keep this in mind as we form our investment strategies and policy opinions for next year.

China, while it still has a way to go, may not be the monster it's made out to be. Their ambitious approach thus far, coupled with their penchant to be seen favorably by the world, will make for even more gains in 2010.

Green Chip will continue to cover policy advancements and investment opportunities both here and abroad, bringing you the best information and analysis available.

Have a great holiday,

Nick

P.S. There's one Chinese company in particular that I've been keeping a very close eye on. It's a small car manufacturer, but it's getting ready to take the electric vehicle and battery market by storm. Some reports claim its technology could make this outfit bigger than Toyota in the very near future. Click here to learn all about the company, and how much investors stand to make as China greatly expands its cleantech reach.

The U.S. Army's New Solar Power Plant

It's the same U.S. military that guards Persian Gulf oil routes.

And it's now becoming a force in renewable energy's worldwide expansion.

Far from the wars in Afghanistan and Iraq, the Department of Defense is setting its own target list to achieve energy independence for the Army's biggest bases.

First, California's Fort Irwin has just begun a multi-year march toward 1,000 MW in solar energy capacity and self-sufficiency from the desert sun.

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Fort Irwin Goes Solar

No one would think you were crazy if you thought Fort Irwin — the Army's biggest training camp — was a Middle Eastern outpost. As a matter of fact, the Mojave Desert complex plays host to a sort of mini-Iraq, where hundreds of Iraqi actors are employed by DoD to accurately play out urban fighting scenarios soldiers may encounter during deployment.

Its 1000+ square miles of barren landscape also make Fort Irwin an ideal place to test aircraft, artillery, tanks. . . and even solar power.

In this map from the National Renewable Energy Lab (NREL), you can see that Fort Irwin's location smack-dab between Las Vegas and Los Angeles also puts it right in the middle of the country's highest average daily solar radiation: over 7,500 Watt-hours per square inch.

Those conditions mean you've got to drink a lot of water during training exercises, and you can bet air conditioners are whirring all day long nearly year-round. . .

So the Army commissioned Irwin Energy Security Partners — comprised of Spanish energy and infrastructure company Acciona's solar power division and Virginia-based Clark Energy Group — to reduce the drain Fort Irwin exerts on local generators like Hoover Dam, and to bring a massive power supply improvement inside the base boundaries.

The Army's International "Green Coalition"

You may not expect to see Madrid-traded Acciona (MAD: ANA) on a roster of the U.S. ground force's top energy developers. But Acciona's North American operations, which include water desalination and wind power, give the Spanish company a firm domestic base that the Pentagon sees as favorable to its own efforts. Acciona North America has its headquarters in Henderson, Nevada, just outside Las Vegas.

For the Fort Irwin solar power project, Acciona has teamed up with Clark Energy Group, an energy services company based in Arlington, Virginia, just outside D.C.

Clark is able to navigate the bureaucracy and get Acciona's concentrating solar power (CSP) technology into the military power mix.

A combination of solar thermal power and photovoltaic (PV) technology will contribute 500 MW of capacity by 2022, at a cost of about $2 billion. That should make Fort Irwin energy-independent as far as electricity is concerned.

The Wall Street Journal is reporting that Army officials have hinted at selling some of that output to area grids — especially if the solar plant is expanded to a full gigawatt under the Army's Enhanced Use Leasing (EUL) program. The EUL is the military equivalent to Public-Private Partnership (PPP) arrangements that many emerging countries and cash-strapped cities have used to launch infrastructure improvements.

Under the EUL, which is administered in Baltimore, Irwin Energy Security Partners will lease Army land to install and operate the solar power plant. The consortium will cohabitate with the military with the goal of landing more contracts as the Pentagon shifts to sustainable energy on its bases.

Out in the brightest, driest reaches of the United States, more international clean energy companies with American HQs may find themselves involved in the Defense Department's "Green Coalition."

Israel's Ormat Technologies has its main North American offices in Reno, Nevada, just north of Fort Irwin. Ormat (NYSE: ORA) is already drawing steam from the ground to drive geothermal electricity generation throughout the West, and inclusion in Army energy plans could give another shot in the arm to Ormat shares, which are now holding just above support levels at $36.

Be it Acciona, Ormat, or another company that gains the most from the American military's forays into security through clean power, one thing is certain: the U.S. is now building an international coalition on renewable energy like none we've seen before.

We'll keep you up to date on which international green companies are set to benefit.

Regards,

Sam Hopkins

International Editor

P.S. Nick Hodge and I just issued another successful recommendation to Green Chip International subscribers. That's become the norm for GCI, as our current open positions now average a 45.9% gain. As for the ones we've closed out. . . they did even better — with a 58% payday. And we're working on more winners for you as we speak. Just take a look at this GCI special report today so you don't miss the next one: Profiting from International Clean Energy Expansion.

Solar Energy Stocks

For some, investing in solar stocks over the past six months has delivered once-in-a-life-time results:

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Others haven't had it so good:

Indeed, playing cleantech's franchise player has proven to be a tough gig.

On one hand, you have a small group of Chinese companies on the brink of doubling or tripling in just two quarters.

On the other. . . a wild roller-coaster ride has ended as it usually does, back at the starting gate.

But what's stoking such discrepancies in a group of stocks that are so closely related?

A Lack of Solar Education

I'm convinced the reason for such volatility and variance is a lack of solar understanding and education that is worsened by constant misinformation from the media.

For the second group of solar stocks above, a downtrend since June doesn't make much sense at all. Granted, the summer months were sluggish. . . but there was a significant uptick in sales during August and September, with demand exceeding supply for several major producers.

That increase in demand should have acted as a bullish signal for major module producers and cell manufacturers.

Instead, it was the so-called second tier suppliers, like Trina Solar (NYSE: TSL), that saw a major jump.

That surge in demand should continue, buoyed by an already-passed 1 GW Chinese solar subsidy and new tax advantages included in the U.S. stimulus. An additional 1 GW subsidy could be passed by the central Chinese government in coming months.

What's more, that same increase in demand is allowing installers and distributors to mark up prices for panels, which could lead to higher average selling prices (ASPs) for suppliers down the road.

And finally, this increase in demand should bump up fourth quarter shipments just enough to beat expectations, which always leads to higher valuations.

This is probably all new information to you. And that's part of the problem. . .

Because you don't always get the full story by reading mainstream news and press releases. Consider these recent headlines from Wall Street Journal, Bloomberg, and the like:

"Glut Feeling: Solar Power's Got Too Much of a Good Thing"
"Solar Panel Glut Will Scorch Small Players"
"Watch Out: Solar Stocks Might Sink"
"Supply Glut Will Put the Heat on Solar Stocks"

With stories like these being pushed by stalwart financial news agencies in the face of contrary data. . . is it any wonder that investing in solar stocks has been a crapshoot?

Finding the Solar Truth

Perhaps the most revealing example is this gem of headline, run in some form by Bloomberg and many others: "German Solar Subsidies Face 'Enormous' Cut."

An 'enormous' subsidy cut in the world's largest solar market would be enough to make any investor shy away from the sector. . .

But it wasn't true.

After the story had been picked up by countless news agencies — even the AP ran it — and spooked countless investors. . . Reuters ran a piece entitled, "New German Government Won't Slash Solar Power Rates: Source." And, as they often do with controversial or misreported topics, they ran a factbox to clear everything up.

Now, if you were getting your solar information from me. . .

I would've told you from the beginning that the German solar subsidy would not be cut this year or next. And, even if it is cut in 2011, that would only lead to increased sales in 2009 and 2011 — ahead of any subsidy changes.

With respect to a solar glut. . . I've been saying that it's a possibility, but that any oversupply could be absorbed by global stimulus-funded projects. Increasing volume, even slightly, can be enough to maintain profitable margins.

A recent joint announcement by First Solar (NASDAQ: FSLR) and the Chinese government that they're building a 2 GW solar power plant is clear proof of that.

This is the problem with most financial news: There's no nuance. It's either black or white — bull or bear.

Hell might freeze over if they were bullish with caution or bearish with a silver lining.

Here at Green Chip, we take a different angle. We want to make money as much as you do. And only telling one side of the story doesn't contribute to that end.

Instead of telling you a "Supply Glut Will Put the Heat on Solar Stocks," I've been warning against a potential oversupply, while still highlighting the best investment opportunities and maintaining a bullish outlook.

I'm not saying to dismiss other news agencies and websites. I'm simply suggesting you make sure to get the entire story — every time.

Not doing so could mean missing a great investment opportunity. . . such as the six-month ~200% runs by Canadian Solar and Trina Solar.

But you wouldn't have wanted to invest in them. . . there was a massive solar glut at the time, right?

Call it like you see it,

Nick

P.S. After writing this article, I came across a new article on Barron's about the German solar subsidies. Direct quote: "The agreement does not call for immediate cuts in the so-called feed-in tariff for solar projects." Maybe they're learning.

P.P.S. I've been using this straightforward approach to lead investors to cleantech profits time and time again. . . no matter what the other outlets are claiming. I've closed 45 winners this year, including several solar stocks at a time when there was supposedly a "glut." If you're tired of the spin, and just want profitable investment information, this approach is definitely for you.

Solar Thermal Energy Companies

Siemens (NYSE: SI) is moving from country to country and from strength to strength in the renewables sector.

This month, the German engineering giant added Israeli solar-thermal company Solel Solar Systems to its Environmental Portfolio. Here, we'll see that Solel's recent progress and Siemens' green growth goals make this is a well-timed acquisition that points to further opportunities for large-cap clean energy investments.

Siemens shelled out nearly half a billion bucks ($418 million) for Solel, which has already established itself as a player in key clean energy markets.

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Solel currently operates 750 MW worth of installed capacity at 15 solar-thermal plants around Spain. The company got a $2.6 million grant from the Spanish government in September, meant to help the company finance Spain's first solar field component plant south of Madrid. There, Solel engineers will produce solar receivers that focus the energy generated at parabolic trough power plants.

Siemens will take on that project now, gaining a leg up in the country Ernst & Young ranks in the top 5 most attractive renewable energy markets in the world.

In Spain and elsewhere, Siemens will couple Solel's high-efficiency receiver production with its own market-leading steam turbine division.

Every bit of synergy helps Siemens push beyond its own advantageous German base — Germany is the #2 overall clean energy market in the world, according to E&Y's Q4 2008 All Renewables Index.

Globally, Siemens expects to take a big bite of the rapidly growing solar-thermal market, which it says will be worth 20 billion euros by 2020.

That's a figure that big companies can't say no to.

And the greening of Siemens, GE (NYSE:GE) and other industrial giants presents us with a new category of global mega-cap shares that are gradually becoming, well, Green Chip Stocks.

When Blue Chip Stocks Go Green

Now, being an industrial behemoth with a U.S. market cap of over $87 billion, Siemens dwarfs most pure plays on renewable energy. Some investors may like the underdog feel of clean energy stocks — after all, until the past few years, the mainstream media paid little attention to anything green. . . and oil prices didn't seem to justify high-dollar acquisition strategies like the one Siemens is currently pursuing.

Siemens isn't shelling out hundreds of millions for Solel on a whim. In fact, solar isn't even the primary motivation for this green grab, if you listen to Siemens CEO Peter Loscher. When the Solel deal was announced, Loscher said, "After the rapid and highly successful expansion of our wind power business, we now want to continue this success story in the solar sector."

Indeed, Siemens is bringing in wind turbine orders at an incredible clip for a recent market entrant. . .

On October 13, Siemens announced six new wind turbine orders in North America, worth over $900 million. A quarter of the 565 MW in turbines Siemens ships will head to Ontario, which has become the hub of Canadian wind energy market momentum. Wind-blown states like Wyoming, Oklahoma, and California (the nation's top renewable energy market), will get the rest.

This is big, and this is real. We've heard fair criticism of multinational firms that engage in "greenwashing," which means they put a ton of public relations money into magnifying relatively small moves towards sustainability. With emissions reductions mandates now being developed in national capitals ahead of the Copenhagen Climate Conference (COP-15) in December, even those baby steps by blue chips will evolve into long strides. So on one hand, Coca-Cola won't necessarily become a "green" company, but Atlanta executives will have to reevaluate their industrial logic like never before.

Siemens, on the other hand, is fusing its own in-house research and resources with valuable startups like Solel. Solar-thermal plant designers will now be able to source steam turbines and receivers from one company, which is huge. Easier procurement means economies of scale are achieved more quickly, costs come down, and more drawing-board plans move into the range of reality.

We've been keeping you up to date on the state of renewable energy finance throughout the credit crisis, and M&A is a major piece of the puzzle for keeping clean energy on track to provide more capacity and enable investors to profit (Wall Street-traded Siemens shares are up 67% in the past six months).

Rest assured, there's plenty more on the way when it comes to top-down industrial stimulus for clean energy stocks.

Regards,

Sam Hopkins

P.S. You've read about the evolution of clean energy and sustainability in Green Chip Stocks for years now. But there's another way to tell the story, and a new film highlights another area where the green shift is taking place. You can watch the whole video, Scraphouse, online right here.

Solar Industry Tariff

Last Wednesday, the New York Times reported that companies importing solar panels to the U.S. are facing up to $70 million in unexpected tariffs.

Because solar panels have become too sophisticated to qualify for duty-free status, the U.S. Customs Agency has stated that they will be treated as electric generators - which are subject to a 2.5% duty.

Now word is, hardly anyone in the industry was even aware of the tariff until last week. I do find this hard to believe. And if they weren't aware of it, they should've been. Such an oversight seems a bit questionable to me.

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Nonetheless, unpaid duties and penalties have been piling up. But it's not just foreign solar manufacturers that are unhappy with the tariff.

The fact is, as a result of an enforced tariff, other countries could impose their own tariffs on U.S. exports. This has caused concern for some domestic manufacturers, as the U.S. has already exported more than a half billion dollars in solar panel equipment this year.

Still, imports do account for nearly half of the solar panels sold in the U.S. So it is likely that we will see foreign and domestic suppliers working together in an effort to negotiate a deal with Customs.

In the meantime, it should be noted that some foreign solar manufacturers are now moving some of their operations to the U.S. Certainly this would allow them to avoid the duty, while also enabling domestic job creation. Cutting out the heavy distribution costs (both environmental and economic) also serves as a bonus.

Moving In

Back in October, 2008, German manufacturer SolarWorld AG (ETR:SWV) opened a solar cell manufacturing plant in Hillsboro, OR. That facility is expected to reach a 500 megawatt capacity by 2011.

And just this past May, Chinese manufacturer Suntech Power (NYSE:STP) announced its plans to establish manufacturing in the U.S.

CEO, Dr. Zhengrong Shi said. . .

"We believe in the outstanding long-term prospects of the solar energy market in the United States, and we will continue to invest in our ability to meet a substantial portion of that potential growth through in-market manufacturing. A number of favorable developments have led us to this decision, including the dramatic growth in utility demand for large-scale wholesale solar projects, the increasing number of states with incentive programs for customer-owned systems and the federal government's recent stimulus package, all of which will drive steady, long-term growth in demand."

According to Reuters, it looks like Suntech will set up shop in either Arizona or Texas.

Still, even with domestic manufacturing credits and the call for more domestic job creation, there's no disputing the fact that China's own tax breaks and labor costs have enabled Chinese manufacturers to cut prices nearly in half.

And while Suntech is building manufacturing in the United States, Dr. Zhengrong said in an interview that in an effort to build market share, his company is actually selling panels on the U.S. market for less than the cost of materials, assembly and shipping.

It's hard to believe that less than a decade ago, solar was cast aside as nothing more than a pipe dream or toy for the wealthy and eccentric.

Yet here we are today, dealing with an industry that's now so lucrative and growing so fast, our heads are spinning with costly tariffs and cut-throat competition.

How times have changed!

So what are your thoughts on all of this?

Should a tariff be enforced?

Can the U.S. effectively compete and create jobs?

I certainly don't have the answers to these questions. But I look forward to reading your responses.

To a new way of life, my friends. . .and a new generation of wealth

Jeff

Buy, Sell, or Hold: First Solar and the Power Revolution

Welcome to the Green Chip Review Weekend Edition — our insights from the week in everything renewable energy and cleantech, as well as links to our most-read Green Chip Review and sister publication articles.

Dear Reader,

If you haven't had a chance to read any of Steve Christ's stuff. . . you're missing out. He's the managing editor of our sister site, Wealth Daily, offering his expertise on real estate and biotech markets. But this week, he has his sights on First Solar, so I thought I'd pass it along.

Good Investing,

—Nick

Buy, Sell, or Hold: First Solar and the Power Revolution

Given the recent decline in shares of solar power stocks, the solar doom and gloomers just can't help themselves these days.

They've come out of the woodwork with their scary tales of impending woe.

In fact, the chorus from these folks turned downright cloudy in August after analysts from Jeffries & Co. downgraded the entire solar sector amid new pricing fears.

"We expect rapid growth in solar volumes," Jeffries said in a note on August 21, "but a downward pricing spiral and lack of discipline around capital deployment leave us cautious on cell and module manufacturers."

Those dark warnings sent shares of nearly every company in the sector into an immediate tailspin, including shares of First Solar stock, which Jefferies cut to from a hold from a buy.

However, as my old pal Nick Hodge said to me on the morning of the news, the Jefferies call was a bit over the top. "It was," the green guru said, "completely unwarranted."

That has given investors with a time frame longer than it takes to eat a sandwich yet another opportunity to invest in one of the few true growth sectors, including in well-run U.S. companies like First Solar Inc.

As for the industry itself, it appears the anti-solar crowd's fears aren't warranted either.

In that regard, consider the following recent developments within the industry that will undoubtedly help to boost future sales:

On August 13,the U.S. government announced a program to award $2.3 billion in tax credits to manufacturers of advanced energy equipment. Authorized by the February stimulus bill, this new provides tax credits to manufacturers who produce clean energy equipment.

On July 30, the Energy Department announced it is making up to $30 billion in loan guarantees available for renewable energy and electric grid modernization projects. The government-backed authority should help boost lending capital for renewable and other clean-energy technology projects, which has dried up with the financial recession.

On top of that, when it comes to renewable energy, let's just say the industry also has more than a few friends in high places, including Energy Secretary Steven Chu. An actual Nobel Prize-winning scientist, Chu is one of solar power's biggest supporters.

In fact, according to Chu, the administration's new goal is to double renewable electricity generation over the next three years. "To achieve that goal," Chu said, "we need to accelerate renewable project development by ensuring access to capital for advanced technology projects."

That means the government will be there to help push these new technologies forward - now and in the future - by whatever means necessary.

Of course, that's not to say that the solar power industry hasn't had its share of problems lately. It has. The industry has definitely been hurt by excess capacity, tight credit, and a bloated inventory of panels that iSuppli predicts will not end until 2012.

On top of that, there is a supply glut of polysilicon that has hurt the industry's earnings and margins this year.

Even still, given the combination of eventual improvements in the technology and favorable government policies both here and abroad, solar power as a long-term investment is one whose time has definitely arrived. . . all doom and gloom aside.

And in this free six-page report, The Wealth Advisory Research Team has broken down the one of the most promising solar power giants, answering the question on every investor's mind these days. . .

Is First Solar Stock (NASDAQ: FSLR) a Buy, Sell or Hold?

In this free report, Wealth Daily subscribers will receive:

The results from The Wealth Advisory's proprietary scoring model
A buy, sell, or hold recommendation
A 12-month Price Target, along with a current Stop/Loss
A technical and fundamental analysis of the company's share price
And much more. . .

To receive a free download of this report and our Buy, Sell or Hold recommendation for First Solar Inc. (NASDAQ: FSLR), click here.

I hope you enjoy your free First Solar report. I'll be publishing many more of these in the weeks to come. . .

Your bargain-hunting analyst,

Steve Christ, Investment Director

The Wealth Advisory

P.S. In case you missed any of the recent top stories from Green Chip Review and our sister publications, we've included them here:

Water Infrastructure Stocks: Flows of Profits Under Your Nose
Energy & Capital Editor Nick Hodge digs through the archives to prove why investing in water infrastructure stocks is always a good idea.

The Tipping Point is Now: How You Can Take Advantage of the Cleantech Revolution
Over $200 billion worth of "stimulus money" has already been allocated to this industry. . . five times bigger than the tech explosion of the '90s, we'll tell you about the cleantech boom on the horizon — and how you can still make lots of money.

Solar Stocks 2010: "The Worst is Already Over" for Top Solar PV Stocks
Editor Sam Hopkins points out why it's a danger for your portfolio to only keep a short-sighted view of solar power stocks. . .

A Meeting of the Bigwigs: What You Need to Know about the Upcoming COP-15 Summit
Some of the world's most formidable leaders are attending a meeting in Denmark this December, including the very same Silicon Valley investment firms that brought you Google, Cisco, and Amazon. . . and we reveal how you can get in on what the insiders will discuss at this historic meeting.

Romania Wind Energy: A New 600 MW Wind Farm In Romania
With about half of the wind farm expected to come online in 2010, Editor Jeff Siegel talks about how this particular wind farm is likely to be the largest onshore wind project in Europe.

Nanosolar's New Solar Technology: New Modules Could Be the Cheapest in the World
Green Chip Review Editor Chris Nelder reviews the latest announcements from thin-film solar manufacturer Nanosolar on their groundbreaking technology and its potential to print the cheapest solar cells in the world.

Green Stocks: Taiwan's UMC on Dow Jones Sustainability Index
Green Chip Editor Sam Hopkins tells readers about Taiwan's United Microelectronics. . . it's not a clean energy company, but it is a top-tier sustainable public company.

Nanosolar's New Solar Technology

There was a very exciting announcement in the world of energy this week, and I've been taking a hard look at it.

No, it wasn't the Tiber field find by BP. Although peak oil deniers seized on the discovery as validation of their argument that technology will continue to make vast new reserves of oil accessible and solve the peak oil problem, the hype was typically overblown. It reminded me of the initial excitement over the Jack field in 2006, which is east of the Tiber field and part of the same Lower Tertiary trend in deepwater Gulf of Mexico.

Perhaps I'll write on Tiber when there is more hard information about it, but on the basis of the very scant data currently available, I would speculate that first oil from it might be produced in 10 years, at a cost in the low billions of dollars, and that it might achieve a maximum flow rate of 200,000 - 300,000 barrels per day (bpd) some years later.

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In other words, in the context of the peak oil problem, where we're worried losing 4 mbpd of oil production capacity each year starting somewhere around 2012, a discovery like Tiber is a good thing. . . but it's hardly a solution. We'd need to continually make similar discoveries roughly once a month in order to significantly change the global supply curve, and that simply isn't happening.

Rather, what had me excited was an announcement from Nanosolar that it was finally ending its "quiet period" after seven years of development, and had completed a new solar panel assembly plant near Berlin. The plant is fully automated using state-of-the-art equipment, and can reportedly sustain a production rate of one panel every 10 seconds, or 640 MW (megawatts) a year if operated 24/7.

The company claims to be churning out 1 million solar cells (about 1 MW) per month now, including production from its San Jose, California, plant which opened earlier this year and is expected to eventually reach 430-MW capacity. When both plants are operating at capacity, Nanosolar would be getting close to thin-film king First Solar's (NASDAQ: FSLR) manufacturing capacity, which is expected to reach 1,189 MW by the end of the year.

Nanosolar has taken a few hits in the press for keeping the wraps on its technology for so long. Founded in 2002, it gained early notoriety for raising a $150 million startup war chest — which rose to $500 million last year — before publicly divulging any real details about its technology, its strategy, or its anticipated production capability. The company is still privately held (much to the dismay of your editors here at Green Chip Stocks!).

Now we have an idea why the company was so careful to play close to the chest. . . and why their unveiling is truly a big deal.

Groundbreaking Technology

I first became aware of Nanosolar in late 2005, when a couple of their engineers gave a dog-and-pony show of their technology to the solar company where I was working at the time. I was immediately impressed by their visionary approach of "printing" solar material using a printing-press technology, which had the potential to achieve enormous savings in manufacturing cost.

But there were some problems to be solved first, like how to deposit a nice even coat only one-micron thick of their CIGS (Copper-Indium-Gallium-Selenium) "solar ink" on the substrate, and to do so at high speed, while still producing cells that were electrically matched so they could be wired together into high-efficiency panels.

There were also uncertainties about whether they should try to produce something revolutionary — like giant solar wrappers that could cover a bus or a building — or more evolutionary, like traditional rectangular modules that could be mounted using the same hardware as standard silicon modules.

Now, it appears they have solved those problems, tested their modules thoroughly, and gotten everything approved by UL, the International Electrotechnical Commission, and other regulatory agencies.

Here are a few of the advantages that Nanosolar's technology has over other types of photovoltaics.

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Instead of using glass as a substrate, like First Solar and other thin film manufacturers do, Nanosolar uses aluminum foil. This has three advantages: One, foil is much cheaper (one or two cents per square foot and mil thickness). Two, it enables them to make the cells in a "roll-to-roll" process, turning a roll of foil into a roll of 50,000 cells in one continuous loop. (Check out their video to see their process in action.) Three, the end result is very lightweight and adaptable to many applications.
Nanosolar may be able to produce its modules more cheaply than any other manufacturer.

Until now, First Solar's module manufacturing cost has been the lowest in the industry, at about 87 cents per watt. Nanosolar has not yet announced its manufacturing cost or module pricing because it is only targeting utility-scale projects where the price is customarily undisclosed. (At this time, the company does not have a product for the retail market, but reports that one is in development.) But in an e-mail response to my inquiry, Nanosolar CEO Martin Roscheisen stated that his company is "planning to demonstrate that our capital efficiency is three times as good as First Solar's."

"Capital efficiency" is a broader metric than cost per watt, including the cost of building a fabrication plant and other costs. As recently as last year, Nanosolar believed it could potentially deliver product to the market at 1/10th the cost of traditional silicon, and build physical plants with roughly 1/10th the capital. I did not receive a direct answer on whether this is still their claimed. But it does seem plausible that Nanosolar will be the cheapest manufacturer in the industry.

The efficiency of Nanosolar's cells is now the highest in the thin-film industry. The National Renewable Energy Laboratory has independently verified that Nanosolar's cells can convert a maximum of 16.4% of the solar energy hitting them into electricity. When the cells are sorted and matched and turned into modules, Nanosolar's median efficiency is higher than 11%, just edging out First Solar's average efficiency of 10.9%. By comparison, traditional silicon modules are about 16% efficient, and hybrid modules like those from SunPower (NASDAQ: SPWRA), are 19.3% efficient — but both types cost more than twice as much as thin-film modules.
Nanosolar has incorporated several important innovations in the design of their Nanosolar Utility Panel^TM modules.

With their solar foil hermetically sealed between two sheets of tempered glass, their modules are mechanically stronger, more durable, and more lightweight than other thin-film modules, so they can be made in larger sizes and eliminate the need for bulky aluminum frames. They claim their modules are able to span 1.7 times the distance between rails that First Solar's modules can, reducing the need for mounting rails by 41% and significantly reducing the installation labor. Their thin profile also allows the company to ship more than three times as many kilowatts-worth in a shipping container as First Solar can, reducing shipping costs.

Nanosolar's panels can carry six to seven Amps of current, compared with one Amp for First Solar's panels, which minimizes resistive losses and puts them on par with silicon modules. Consequently, the panels can be strung together in much longer strings before hitting the inverter's voltage input limit. This can reduce the need for cables running back to the inverter — a significant part of the balance-of-system costs — by as much as 73%, and allows arrays as long as 64 meters (versus a 12-meter maximum for First Solar), further reducing installation and cabling costs. The panels are also designed and certified to handle a system voltage of 1500V — 50% higher than the industry standard.

Finally, the modules have an electrical connector on the edge of the module, rather than inside the back of the module, so only a short cable between modules is needed to make the electrical strings. This reduces the labor cost of interconnection by 85%, according to independent third-party testing. Having personally spent many an hour crawling around under arrays fiddling with the wires (and occasionally making costly mistakes in the process), I can tell you this is a terrific innovation.

In total, Nansolar believes the advantages of its module design will bring the balance-of-system costs for their installations in line with that of traditional high-efficiency silicon modules.

A Very Promising Future

Now, you might be wondering why I'd spend this week's column talking about a company that isn't publicly traded. The answer is simple: Nanosolar's technology could be a game-changer for solar PV, pushing the industry ever closer to the point where watt-hours generated from solar are as cheap — or cheaper — than those from coal. Its production process also offers the tantalizing possibility of churning out solar cells almost as easily as we print newspapers.

As the company matures and increases the consistency and rate of its output, and its product cost becomes more fully-known, the rest of the world will get a glimpse of just how effective solar power can be in addressing our energy challenge. With a reported $4.1 billion backlog of orders to fulfill (outside the U.S.), a strong balance sheet, and a bright future ahead, Nanosolar is emerging as a serious player. . . and they haven't even started on the retail market, let alone groundbreaking applications beyond rectangular rail-mounted modules.

In time, maybe we'll even get a chance to jump in on an IPO, and ride the next big wave of technological evolution in solar.

Until next time,

Chris

P.S. While you can't invest in Nanosolar just yet, there are plenty of available solar plays turning profits for investors. In fact, Nick's readers at the Alternative Energy Speculator are finding ample opportunity for profit. Of the nearly 40 winners they've closed so far this year, 17 of them have been from solar companies. And that doesn't include the open winners in his portfolio! Click here to see how Nick is closing more than a winner per week and what his next move will be.

Solar Stocks 2010

I don't consider myself a big Billy Joel fan, but I've had some classic lyrics stuck in my head at the office lately. . .

You may be right.

I may be crazy.

The $350 Billion Dollar Oil Secret

U.S. oil production will rise by 1.2 million barrels a day over the next few years.

At current prices, that's $350 billion in new oil revenue. But much of that revenue will go to small oil companies that currently trade between $3 and $8 a share.

Annual revenue for this top pick will grow 1,790% — this year!

You can get the full report here.

That's what I wanted to say to solar power market analysts at investment bank Jefferies & Company, who took a machete to their estimates in the same clean energy sector on August 21.

As a listed firm, Jefferies Group (NYSE:JEF) has enjoyed an impressive share-price appreciation of 184% in the six months from March to September. I won't doubt that investors assigned that premium for a reason.

Yet, the logic behind their downgrades of no fewer than eight solar power stocks seemed rash.

PV sector observers at Jefferies cited a downward pricing spiral and overproduction in China as reason enough for pessimism across the board. They said they even factored in lower production costs at solar module manufacturers around the world that could pad margins, and that the forecast looked bleak. That mass downgrade spooked investors, and many fled their positions.

My colleagues and I here at GCR thought the hatchet approach to solar power stocks that Jefferies took was short-sighted.

"They may be right. . . for now," we said. "But what about in 2010?"

It's true that solar panel prices have dropped by 50% this year, as economies around the world wobbled. And capacity utilization has been estimated at as low as 25%, with manufacturers holding over 100 days' worth of inventory they would rather move from shelves to rooftops.

Still, billions of stimulus dollars are ready to be doled out well into 2010 in Germany, China, the United States, and other countries among the world's top current and developing solar markets.

Nevertheless, to paraphrase the piano man, Jefferies & Co. may have been right — and solar bulls may all have been crazy.

On Tuesday, September 8, we saw who had all their marbles when Arizona's First Solar (NASDAQ:FSLR) announced a deal with the Chinese government to build a 2,000 MW solar power plant in Inner Mongolia. Jefferies & Co.'s oversupply scenario now looks more like an overreaction.

First Solar Proves Big Project Power

I've seen Inner Mongolia for myself. The capital city of Hohhot is made up of rows of huge identical housing blocks, stretching across the barren landscape like a Las Vegas made of Legos.

Its remoteness isn't an issue as far as the Chinese government is concerned: for decades, they've been moving people from the crowded east to the area where First Solar will operate a 2 GW operation.

And just as migration is a process, First Solar's plan to provide power to some three million homes in the autonomous region of Inner Mongolia won't play out right away. . . but instead over the ten years leading uhttps://corp.angelpub.com/?tools_articles_editp to 2019.

You might see that as painfully slow. . . or as sustained business that will keep revenue flowing. First Solar will provide thin-film PV products and also kick-start local production to give the American company a low-cost manufacturing base for Asian endeavors.

At least in the case of First Solar, Jefferies only dropped it to a "hold." So if you stayed put, you didn't miss the nearly 16% upside FSLR has delivered in just the first two trading days of this week.

What about Trina Solar (NYSE:TSL), a Chinese solar ADR that Jefferies didn't touch? They didn't get the 2 GW go-ahead in their own backyard, so do they see clouds covering their profit prospects a year from now?

Trina CFO Terry Wang says no.

"The Worst is Already Over"

"The worst is already over," Wang said this week in Beijing, referring to the PV market. He even gave a tempered time frame to allow for inventories to dust off the cobwebs for more big deals to come through. The U.S. and Chinese solar power sectors "can wake up in the fourth quarter" of this year, "but a full recovery is likely to have to wait until the second quarter of next year."

That's just around the corner, and any investor's periscope should be peering into Q2 2010 right now.

Suntech Power (NYSE:STP), another China-based solar player, isn't even waiting that long. STP has restored its 2009 shipment goal after lowering it not long ago. "Maybe about a month ago the markets were still slower than we would have liked, but as of the past month — and this has been led principally by Germany — we have seen the market pick up," Chief Strategy Officer Steven Chan said in early September.

Germany is a key market where Jefferies pointed to uncertainty in government incentive packages as a potential major drag on global PV company profits.

Suntech's Chan echoes Piper Jaffray's PV sector analysis. Jaffray, unlike Jefferies, is saying fears about Germany's feed-in tariff are overblown. Household installations are now cheaper than ever — meaning more business will come with recovery — and India's 20- GW solar power goal brings another major developing market in with China as a driver of PV market growth.

Again, I may be a card short of a full deck, but I'm not going around spooking investors out of winning positions just because the current numbers look sour. Analysts ignore the power of stimulus-fed megadeals at your risk, not just their own.

We will continue to do our best to give you the long view of what you can expect and where you should invest.

Regards,

Sam Hopkins

Editor's Note: It's not winter yet, but ministries of finance, environment, and energy from around the world are already preparing for December's COP-15 talks in Copenhagen. It's being called "a deal on the economic structure of the planet." Click here to learn more about how to stake your claim.