Shadow Cast Over Solar Stocks

Solar stocks have been hit Monday by news that Senate and House Democratic leaders are considering a plan to leave renewable energy out of a pending U.S. energy bill. An alert posted Friday by the Solar Energy Industries Association on its web site says that “there are widespread reports that a decision has been made, at least provisionally, to move energy legislation without a tax title that extends the Solar Investment Tax Credits.”

The notice asserts that “a bill without the solar ITC provisions would be a tremendous lost opportunity for our industry and our country.”

Stephen Chin, an analyst at UBS, this morning asserted that removal of the tax credits from the energy bill “increases the likelihood that the credits could expire in 2008.” He writes that “an orphaned solar ITC may not find bipartisan support during an election year, increasing the likelihood of expiration.”

Chin says that the current tax credit allows commercial system owners a 30% tax credit against total system costs. Expiration of the tax credit, he says, would likely reduce solar system demand among commercial customers, which accounted for 41% of 2006 solar installations. He adds that utilities may be slow to embrace solar if a provision allowing them to take the 30% tax credit isn’t passed.

Chin notes that Applied Materials (AMAT) could see decreased demand for solar-related equipment without the tax credit, and that there also could be a negative impact on solar-wafer producer MEMC Electronic Materials (WFR), pointing out that its largest customer, Suntech (STP), is “increasingly exposed” to the U.S. solar market.

Solar stocks are suffering significant losses Monday:

• First Solar (FSLR) is down $22.11, or 10.7%, to $184.74.
• Suntech (STP) is down $5.22, or 8.5%, to $56.33.
• SunPower (SPWR) is down $15.57, or 12.1%, to $113.13.
• MEMC (WFR) is down $3.04, or 4.3%, to $68.12.
• Applied Materials (AMAT) is down 28 cents, or 1.5%, at $18.43.
• JA Solar (JASO) is down $3.84, or 7%, at $50.67.
• Evergreen Solar (ESLR) is down $1.28, or 9.1%, at $12.80.
• Canadian Solar (CSIQ) is down 75 cents, or 6.7%, at $10.37.
• LDK Solar (LDK) is down $2.35, or 5.8%, at $38.07.
• Yingli Green Energy (YGE) is down $4.05, or 12.7%, at $27.80.

Comments

[alpha24seven]

"could be a negative impact on solar-wafer producer MEMC Electronic Materials (WFR), pointing out that its largest customer, Suntech (STP), is “increasingly exposed” to the U.S. solar market."

All solar is exposed to the US market. It is fungible as we've seen in the last rush to ship all domestic product to Germany during their rush to subsidize. This is a fluid global market and their is no safe havens from market turn downs.

[Ben B]

Subsidies aside, historically, shipments of PVs has been highly correlated to the price of oil. You can check for yourself at the department of energy website. Given that information, I do not expect a decrease in subsidies to have a drastic affect on PV shipments given the extreme rise in oil prices. Another thing, China's subsidies are still valid and they are still pushing towards 20% renewable energy, just like most US utilities.

[Ben B]

Subsidies aside, historically, shipments of PVs has been highly correlated to the price of oil. You can check for yourself at the department of energy website. Given that information, I do not expect a decrease in subsidies to have a drastic affect on PV shipments given the extreme rise in oil prices. Another thing, China's subsidies are still valid and they are still pushing towards 20% renewable energy, just like most US utilities.

[Mark Anthony]

For First Solar (FSLR) the much bigger problem is not tax credit, but rather the extremely limited telurium supply of the whole earth. They solely rely on the cadmium telluride semiconductor. Cadmium is extremely toxic, but tellurium is more toxic to FSLR.

The whole world produces about 215 tons of tellurium per year, even less than platinum. FSLR needs 135 tons per GW of production. Due to other usages, tellurium price already boomed from $4 to over $100, implying a severe shortage. How FSLR is going to find tellurium source to feed its new factories being built in Malaysia? This company has no growth potential whatsoever.

See a related article:
www.bloggingstocks.com.../

Read more on my blog:
stockology.blogspot.co...

[gebby]

it wont pay to be negative on the solar industry.