Tentative Solar Investing Rule #7:
National Champions will be among the survivors.
Solar and wind are both going to have an extended period of consolidation, winnowing out the weaker companies. In a capital-intensive cyclical industry, access to cheap capital is crucial, to surviving downturns, and being well-prepared to take advantage of the subsequent upturn. Governments have the deepest pockets. Also, given how heavily regulated the entire energy industry is, a close relationship with policy-makers is a big advantage.
The only National Champions in solar are Trina and Suntech in China. Neither Europe nor the U.S. has committed to a domestic industry, or aggressively backed dominant local companies, the way China has. Trina got a contract for a big R&D facility, while TSL and STP shared those billions in loans. LDK got part of its polysilicon factory bought for a price above what the market price would have been, but that support by the government isn't in the same class as for TSL and STP. I haven't read about anything being done specifically for YGE or JASO or CSIQ.
In the U.S., the only solar company that looks like a survivor is FSLR. However, they have little U.S. government support targeted specifically at them, and most of their production is in Malaysia anyway. Maybe a rising tide of economic nationalism will change that.
This rule also applies to wind, where there is a longer list of clearly dominant National Champions: GE in the U.S., Suzlon in India, Mitsubishi in Japan. Europe has too many Champions, a legacy of their earlier dominance in wind energy. Denmark and Spain have Vestas and Gamesa, while Germany has Enercon, Nordex, and Siemans. Those 5 probably need to winnowed down to 2 or 3. China has Sinovel, Goldwind, and Donfang, which will probably get winnowed down to 1 or 2 eventually. |
