Tuesday, June 28, 2011

Thoughts on Investing in Solar Power

I've been thinking about investing in photovoltaic solar energy. Here's why:

Energy consumption is growing world wide, and we need to build more capacity. As a country, your options are: Build nuclear plants, build coal plants, build wind parks, build solar parks, or encourage people to add solar to their roofs. Post-Fukushima, it's going to be hard to build nuclear plants. Coal and gas are heavy carbon emitters. Wind isn't suitable for everywhere. Solar is a great, emission-free option, especially for sunny climates.

Demand for photovoltaic will continue to grow. Solar stocks are depressed right now as some countries like Germany and Spain are ending their subsidies to install solar panels. This doesn't mean the end of solar installations though.

One crucial advantage of solar power is that the decision to install solar on your roof can be made and financed by individuals, and the electricity can be consumed where it's produced.

For example, in the US, demand will grow as people realize that they can knock down their air conditioning bill by installing solar panels on their roofs. In sunny states, air conditioning makes up 60 to 70 percent of the summer electricity bill. Solar power provides electricity precisely when air conditioning consumes it - in the middle of the day - no batteries or storage needed. From a recent visit in Arizona, it seems like few people have solar on their roofs, and there will be a lot of cells as consumers get more informed.

There have also been developments in financing solar installations. SolarCity, a company founded by Elon Musk and backed by Google, will finance your solar panels and lease them out to you. This allows people to realize savings without the upfront cost - more and more people are likely to use it.

Germany is a small, rainy country and had 7400 MW of photovoltaic (PV) solar power installed in 2010. The US, sunnier and bigger, meanwhile has 878 MW installed. There's plenty of room to go.

How to invest? It seems like there are three ways to bet on PV solar power.

It seems like the best bet would be to invest in financing companies like SolarCity. They will have reliable cashflows, high profits, and there's little competition in the space right now. Unfortunately, I couldn't find a single public company that does this. Google has made this bet by investing in SolarCity, but it's still a private company, so this isn't something an individual investor can do.

You could invest in the companies that make the equipment to manufacture PV cells. These are primarily German and Swiss companies - one example is Meyer and Burger. They have high profit margins, but by betting on the equipment manufacturers, you're betting on the second derivative: The growth in manufacturing capacity, not on growth in solar power.

Lastly, you could bet on the companies that manufacture the actual PV cells. This is essentially a commodity market, with many companies in the US (e.g. FirstSolar, GT Solar), China (e.g. Suntech, JA Solar), and Germany (e.g. Q-Cells, Solarworld). Some of these companies are trading very cheaply right now because of concerns of overcapacity. Just like there used to be 500 car companies in Detroit at the beginning of the 20th century, I expect a lot of this industry to eventually consolidate. Thus, it's crucial to pick the winners. I've ran the numbers on some of these companies. I'll share those in a second post.

Sunday, June 26, 2011

A 21-year old kid coding away on his MacBook somewhere

"In Silicon Valley, you get used to the thought that there's a 21-year old kid coding away on his MacBook somewhere, and that that kid will be the next Mark Zuckerberg. The underlying meritocracy of this thought is exciting."

Monday, June 20, 2011

Samsung Galaxy Tab 10.1 Unwrapping

The Samsung Galaxy Tab 10.1 is a beautiful device, and it's thinner and lighter than the iPad 2. I just got it in the mail from Amazon, and in honor of Apple product unwrap documentaries around the world, I decided to post some pictures of the unpacking process.

Note that this is the Samsung Galaxy Tab 10.1, not the Samsung Galaxy Tab 10.1v, which is its slightly fatter and older brother.

For some good reviews of this tablet, check out Anandtech's review which calls it "the sleekest Honeycomb tablet" and ArsTechnica's piece which says it's a "whole new world".

I've already ordered another one of these as a gift.

Click on the pics to get the full-size view.

Package arrives from Amazon:



Opened package

Cables - there are in-ear headphones,  power adapter, a special Samsung cable (looks like an iPod/iPhone cable) and a manual

Backside wrapped

Backside unwrapped

Turning it on for the first time

Samsung logo on startup - apologies for the glare, I work in a pretty bright office

It's soo thin

Home screen

Google Maps - correctly picks up my location as the Googleplex

Google Maps 3D View

Headphone jack on top

Speakers on each side

Samsung connector (iPhone/iPod-like) on the bottom

The tablet arrived with 4% remaining battery so I had to plug it in pretty soon after it arrived. In addition to my Galaxy, I also have a Motorola Xoom that Google gave me, and compared to the Galaxy it seems outdated - it's heavier, thicker, and less pretty.