In the middle future—say, the next five years—the energy sector landscape looks like it’s going to be very different than forecast just a year ago.

Nuclear energy seems to be, if not dead, on life support. (At least until everyone forgets Fukushima Daiichi. Five years or so?)

Predictable grid distribution problems have hit wind power harder than predicted.

Solar companies are driving costs down and efficiencies up faster than all but the most optimistic advocates forecast.

And while natural gas prices remain so low that it’s hard for gas producers to make a profit, the makers of equipment for generating electricity from natural gas are experiencing boom times.

It’s tempting to put this all down to the nuclear disaster (or near-disaster if your definition of a nuclear disaster requires molten nuclear fuel burning its way toward the earth’s core) at Fukushima Daiichi. The operator of that nuclear plant, Tokyo Electric Power, now acknowledges that three of the plant’s four reactors suffered fuel meltdowns in the days after Japan was hit with a devastating earthquake and tsunami. The company also says that it’s possible that the pressure vessels that house the uranium fuel rods, were breached in the disaster. But “most” of the fuel remained inside the pressure vessels, the company adds not so reassuringly.

It’s tempting, as I noted, to say that it’s the Fukushima Daiichi disaster that has rearranged the energy landscape.  I don’t think that’s the case. Read more

Yingli Green Energy (YGE)

While the United State has dithered over how, when, and whether to invest in the energy industries of the future, solar cells and panels have become a commodity business. And that gives a huge edge to China’s solar manufacturers with their significantly lower labor costs. Morningstar estimates that it costs 20% to 30% less to produce a solar panel using traditional solar panel technology in China than in Europe. (Notice, please, the word “traditional.” Thin-film solar technologies are an entirely different ballgame.)

That has led to a global price war at a time of an uncertain level of demand for solar panels as companies try to grab or maintain market share. For investors, price wars over market share always present the danger that competitors will cut their prices so far that they sacrifice profit margins in an effort to grow market share. That’s not a formula that investors want to buy into.

So the best news from China’s Yingli Green Energy Holding’s (YGE) third quarter earnings report Friday, November 19, was that gross margin stayed extraordinarily healthy at 33.3%. Gross margin beat the company’s guidance for 31% to 32% for the quarter. Gross margin in the second quarter of 2010 was 33.5% and in the third quarter of 2009 22.5%. Operating margin came in at 22.4%.

Guidance for the first half of 2011 was not as downbeat as that from other solar panel producers—that’s either a reflection of Yingli’s strong market position or a bit of wishful thinking. (My suspicion is some of both.) The company forecast that average selling prices would be flat in the first half of 2011 and show a slight decline in quarters three and four. It would surprise me if prices were that strong in 2011. Germany, the world’s largest market for solar panels because of generous government support, has said it will cut subsidies by 13%. Spain and the United States, other big solar markets, are under extreme budget pressure. All this as the global solar industry, including Chinese solar producers, is expanding capacity.

This is where a second Yingli advantage comes into play. Read more

Sell Q Cells (QCLSF.PK)

Solar has become an impossible business—even if you are the largest independent producer of solar cells in the world—if you can’t get costs under control.

Q Cells (QCLSF.PK) is the midst of layoffs, write downs, and asset sales that are intended to fix what is now an uncompetitive cost structure. Read more

A cynical guide to profits from fighting global climate change

The vague, blatantly inadequate “agreement” wrangled out of the Copenhagen conference—or to give the meeting its official name The United Nations Climate Change Conference—by President Barack Obama is nonetheless a game changer.

Oh, not because any of the countries that the signed on to effort at global saving face have committed to actually do much of anything. But because the very inadequacy of this agreement forces all meaningful action back onto national governments.

If you want to know where the profits—and costs—of global climate change will be for the next decade, then I think you need to study not the technologies of climate change but the nature of the governments and economies that will stumble toward addressing this problem.

The nature of the U.S. economic and political system, for example, tells an investor a great deal about how to make money on global climate change in the next few years.  

Sometimes looking at the challenges of global climate change I think this problem was designed by some mad economist temporary sitting in God’s chair: It plays to just about every weakness in capitalist market economies.

Shall I count the ways? Read more

From squeeze to glut for solar silicon makers

Soleil Securities analyst Paul Lemming has issued a note warning of a polysilicon glut that will hit the solar industry in 2010, according to a post by Eric Savitz on the Barron’s Tech Daily Trader blog.

Over the next three quarters, he calculates, the amount of polysilicon available to the solar cell makers will increase by about 70% because every major producer of polysilicon will ramp new capacity in the first half of 2010. That will send the spot price of polysilicon to the mid $30s per kilogram over the next six months from the current $50 to $55 range. (Read more of Savitz’s post here http://blogs.barrons.com/techtraderdaily/2009/12/09/solar-huge-poly-glut-coming-in-2010-soleil-analyst-says/ ) Spot polysilicon sold for a high of $450 per kilogram at its peak in 2008 and for $130 to $150 per kilogram in February 2009.

The effects of this will be devastating on polysilicon suppliers who will see the price for the silicon that they deliver to solar cell makers drop. Already in February polysilicon maker MEMC Electronic Materials (WFR) announced that had renegotiated its contract with solar cell maker Suntech Power (STP).

Who will take the punishment? Read more