A drop in oil, and a pall in Germany, give solar stocks a shiver
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From Times staff writer Edward Silver:
Bad news about German government subsidies and good news about oil prices conspired to chill solar power stocks Thursday -- at least for a day.
Crude futures slid more than $4 a barrel, and when anxiety about fossil fuel supply eases, alt-energy shares often wilt. The other issue has been less discussed. Despite its gray skies, Germany has used public-sector largesse to become a leader in solar installations. Here’s the worry: If lawmakers in Berlin quicken planned subsidy cuts, as they are contemplating, solar’s future gets cloudy in a key locale.
Analyst George Kotzias of Calyon Securities flagged the issue Wednesday but didn’t pan the shares. On Thursday, Merrill Lynch’s Mark Heller flagged it again, expanding the scope of the risk to other nations. He lowered his ratings in the bargain, and down the stocks went. Evergreen Solar Inc. ended the day lighter by 9.4%. SunPower Corp. gave up 8.4%, and the Market Vectors solar ETF dropped 6.5%.
Today the stocks recovered somewhat. Evergreen edged up 2%, SunPower jumped 7.7%, and industry leader First Solar Inc. rebounded 6.1% after slumping 7.7% on Thursday.
Conservatives in the German government are examining the demands on their tax base as Europe’s economy threatens to go slack. It’s a point well-taken. When money is tight, cheaper is better and muddling through the present can take priority over laying groundwork for the future.
Nevertheless, Kotzias expects only moderate subsidy reductions and called the selling in the stocks overblown. Many countries, he notes, are going the other way and boosting support for solar. France, Italy and the U.S. are in that camp. All the while, the solar module producers are lowering cost per kilowatt. First Solar, which counts many admirers on Wall Street, comes closest to erasing the pricing advantage conventional sources have in generating electricity. That may be the catalyst for widespread adoption.
The German question, however, brings a rarely mentioned risk into view: In 2007, the nation accounted for 91% of First Solar’s $504 million in sales. We’ve all been advised to diversify our portfolios -- shouldn’t that apply to geography as well?
If Germany becomes a tougher place for solar firms to turn a euro, that concentration could put a dent in First Solar’s results. It may not be as bad as that, though. The company has a whopping order backlog worth $6.4 billion, demonstrating that it’s the Mercedes of the business -- as its $267 stock also attests.