The Long Chase For Solar Power [First Solar, Inc., SunPower Corporation, SolarCity Corp, Sunedison Inc]

A Market as Big as Two Billion Backyards

According to the report, “The behavior from here seems clear: the solar industry will expand. Retaliatory steps from distribution utilities will increase the market for cost-effective battery storage.”

Bernstein maintains, “This becomes – initially – a secondary market for battery technologies being developed for the auto sector. A failed battery technology in the auto sector (too hot, too heavy, too rigid a form factor) might well be perfect for the home energy storage market… with an addressable end market of 2 billion backyards.

“And for some years, that will be the extent of the effect. We have previously calculated how large the solar sector would need to be in order to become a material share of incremental energy supply each year and therefore begin to displace high-cost oil and gas supply and start to depress prices.

“We estimate that the solar industry would need to be an order of magnitude larger than it is today to have this kind of impact. At the point where solar is displacing a material share of incremental oil and gas supply, global energy deflation would become inevitable: technology (with a falling cost structure) would be driving prices in the energy space. But even on an aggressive view, this could take the better part of a decade.”

Giles adds that, according to the Bernstein analysts, “The chief risk is that they are being too conservative. The big oil and gas producers, and the investors that control the flow of capital, may not wait until energy prices do actually deflate; they will likely change their behavior well before that in anticipation that it will happen.”

The report speculates that, “If the downward sloping forward curve is ever accepted as permanent, rational behavior from energy producers will guarantee it is so. Sitting on oil and gas reserves for the benefit of generations yet to come ceases to be a rational strategy if that reserve represents a depreciating rather than an appreciating asset.”

This, Bernstein says, is the hidden flaw with the idea that solar power is “too small to matter.”

Ultimately, it says, what may kill the energy market for equity investors is not the fact that renewable technology and battery storage will turn into behemoths, but the realization of that future as inevitable.

With that in mind, there are two things to remember as we move into what the bank claims is going to be a significant change in energy production cycles worldwide.

First, as veteran Oil & Energy Investor readers well know, my position remains that it is all about the energy balance, not simply just the pushy new kid in town. It’s the ability to maintain the balance of multiple available and interchangeable energy sources that will bring overall end-user costs down and improve efficiency.

Second, the envelope in this area is really going to get pushed by the nation rapidly accumulating the lead in net generation solar power systems…

China. More on that as it develops.

Money MorningWritten By Kent Moors From Money Morning

We’re in the midst of the greatest investing boom in almost 60 years. And rest assured – this boom is not about to end anytime soon. You see, the flattening of the world continues to spawn new markets worth trillions of dollars; new customers that measure in the billions; an insatiable global demand for basic resources that’s growing exponentially; and a technological revolution even in the most distant markets on the planet.And Money Morning is here to help investors profit handsomely on this seismic shift in the global economy. In fact, we believe this is where the only real fortunes will be made in the months and years to come.

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