Politicians Take Solar's Sexy Back

Good ol' Jay Leno once said that "politics is just show business for ugly people". And thanks to the politicians the sexy solar sector just got ugly. Solar investors have been driving up valuations as if solar was going to take over the world tomorrow, and these investors have now been forced to wake up to reality and smell the coffee. Why? "Poli" - a Latin word meaning "many," and "tics" - meaning "bloodsucking creatures". That's why.

According to the Solar Energy Industries Association (SEIA), a national trade group for the solar industry, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid were moving forward with energy legislation without a tax title that extends the Solar Investment Tax Credits (who said that politicians are people who, when they see light at the end of the tunnel, go out and buy some more tunnel?) With mounting political pressure, the Democratic leadership has been considering ways to slim down the energy package to help assure passage in both houses. The bottom line: If the credits aren't extended it could slow the adoption of solar generation by utilities.

A spokesman for Pelosi said that no decision has been made to drop any provision of the bill, but traders used the announcement as an excuse to dump solar stocks. On the day of the SEIA announcement, SunPower (SPWR) dropped 11%, First Solar (FSLR) fell 10% and MEMC Electronic Materials (WFR) traded lower by 4%.

The bulls are quick to point out that the U.S. accounts for less than 10% of the solar-products market, and they will most likely see the pullback in solar stocks as an attractive buying opportunity. But these bulls can't see the forest for the trees. There are bigger forces at work here; if an industry's growth depends on politicians instead of supply/demand fundamentals, we should regard its lofty valuations with the same distrust we reserve for politicians. To read my other articles on this topic click here, here and here.

There is no doubt in my mind that solar power will one day be a viable energy source. However, in the near term the industry still has to go through some growing pains. One stocks to highlight: JA Solar (JASO - Last trade $54.85) does not currently sell into the United States, and their recent guidance looks far too conservative.

Disclosure: I do not own any of the stocks mentioned above. I do not own a solar panel.

Comments

[cylindar]

Both Solar and hydrogen will be the hallmark of this century. The demand will grow and the politicians will follow. Global warming and pollution need to be addressed so the politicians will follow to solar and hydrogen answers. Don't worry, the politicos do not really have a choice after a certain point. Of course they will be late for the party as usual. Politicians are basically stupid. Just look at the way they were conned into the biofuel, ethanol thing. Hey everybody; put BioWilly in your car, even if it does mean that you will no longer have any land to grow food on. At least you will be able to drive around while you are starving. HaHa. No, the politicos will have to do the right thing, but of course they will do it for all the wrong reasons. No matter; we energy people will get our way one way or another.

[research]

You state "if an industry's growth depends on politicians instead of supply/demand fundamentals," as if ANY energy source was not at the mercy of politicians. Carbon taxes could shut down coal, oil depletion allowances changes could limit oil. Nuke are rightly dead because they can't get insurance. Look at all the money going into fossil fuel research versus the paltry sum for renewables. The 2 trillion being wasted in the Iraqi desert would more then pay for replacing all coal electric in the USA with solar and wind.

For solar, since air conditioning is the major electric load in sunny places, it makes perfect sense to put solar electric and refrigeration units on available space while providing shade: roofs!

[research]

You state "if an industry's growth depends on politicians instead of supply/demand fundamentals," as if ANY energy source was not at the mercy of politicians. Carbon taxes could shut down coal, oil depletion allowances changes could limit oil. Nuke are rightly dead because they can't get insurance. Look at all the money going into fossil fuel research versus the paltry sum for renewables. The 2 trillion being wasted in the Iraqi desert would more then pay for replacing all coal electric in the USA with solar and wind.

For solar, since air conditioning is the major electric load in sunny places, it makes perfect sense to put solar electric and refrigeration units on available space while providing shade: roofs!

[mouselion]

Sol, they got it out for us!

[godlessclif]

I think it is time to sell solar.
The way to generate alternative energy is with your car. Goolge thinks it is time to put all our cars on the grid.

[sheila]

you want to boost solar? contact the Los Angeles City Council and tell them to rescind the (snort!) "Green Path" which will pave over thousands of acres of beautiful, if fire-prone, wild lands in order to build super-dangerous (fire-causing) 500kV lines so they can IMPORT solar and other "renewables" into sunny, roofy LA. WTF???

tell them to use that $1.6 billion to SUPPORT LOCAL SOLAR INITIATIVES at a much higher level and you will see a massive bump in solar usage and solar jobs and solar stocks - we got 4 million rooftops here, ready to generate renewables - why destroy other areas and deny Angelenos the opportunity to get free electriciy???

it's idiots like LADWP who are ruining the market for solar, then greenwashing it, not just idiots like Congress.

[23000Days]

WTF! Are they or aren't they removing the solar tax development tax credit???

[realitytrumpsbull]

Wanna use eco-friendly, low-impact, low-tech
solar energy? Start tomorrow, by getting up
at 6AM. Immediately, if not sooner, take your
day outside. Wow. Solar energy, for a whole
12 hours, and I don't think they can charge
you for it. Yet....