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Solar Power: America Invented It… China Owns It… Opportunity Springs From It

Americans invented photovoltaic technology. We used it to get to the moon. China may have cornered the market. But we have them right where we want them.

“We argue so much about the silly politics of climate change and fail to recognize the gargantuan economic opportunity that this presents.”

So says Gregory Wilson, the co-director of the U.S. Department of Energy’s National Center for Photovoltaics in a recent interview with ClimateWire’s John Fialka.

“The Chinese,” he adds, “seem to have recognized the significance of this opportunity.”

China has essentially cornered the global photovoltaic (PV) energy market. That’s the kind of dominance that central planning — carried out via the National Energy Administration — can achieve.

Domestic energy demands driven by strong economic growth have forced decision-makers to consider all available options as they formulate China’s famous five-year plans.

Under the 13th plan, as MIT Technology Review reported in March, China will add 15–20 gigawatts of solar capacity every year from 2016 through 2020.

The Middle Kingdom’s installed solar capacity is now 43.2 gigawatts. The global figure is 227.7 gigawatts.

At its planned rate and the forecast pace of growth for the rest of the world , China will account for 22–27% of global installed solar capacity by 2020, up from 19% today.

There’s a massive domestic opportunity. And there’s a pretty big international opportunity as well.

Indeed, China has already established a commanding lead on the cusp of what ClimateWire’s Fialka wonders may be the “Photovoltaic Energy Era.”

“The Chinese,” he adds, “seem to have recognized the significance of this opportunity.”

“An industry that has long been little more than a dream for governments, environmental activists and other strategists hoping to find ways to curb global warming,” writes Fialka, “blossomed into worldwide reality last year.”

According to the International Energy Agency, 2015 was a year of “impressive growth and acceleration of the global market deployment” of PV.

The world added 50.7 gigawatts of installed solar capacity last year, a 26.5% increase compared with 2014.

As Fialka notes, “Nations from all regions reported to the International Energy Agency for the first time that their markets for what is known as photovoltaic energy were growing.”

Driving this growth is a continuing decline in costs for PV systems — a trend that’s accelerated in 2016.

The IEA reports that recent power purchase agreements for solar-generated electricity have been booked at record-low prices of 3 cents per kilowatt-hour.

The U.S. Energy Information Administration reports, meanwhile, that the “levelized cost of electricity” from PV has declined by 79% since 2010, from $396.10 per megawatt-hour to $84.70.

The irony is PV technology is a U.S. invention, a “phenomenon… first observed and experimented with by scientists in Bell Laboratories” in 1953. PV helped us beat the Russians to the moon.

The world added 50.7 gigawatts of installed solar capacity last year, a 26.5% increase compared with 2014.

High costs impeded solar’s widespread adoption from the 1960s until well into the 21st century.

But now, thanks to China, it’s getting cheaper all the time.

As Fialka reports:

According to U.S. Department of Energy experts and reports, the remaining two large American panel makers are now outsold by at least six Chinese competitors. China produces 40% of the world’s panels versus 20% by U.S. companies, and it is continuing to expand its lead. Meanwhile, the world’s solar market is generally regarded to have grown into a $100 billion-a-year business.

China’s central planners have stated that their solar and overall renewable ambitions (the 13th Five-Year Plan includes goals to more than double wind energy capacity and boost electric vehicles by a factor of 10) are about meeting the country’s commitments under the Paris climate agreement.

There’s also a pollution factor.

China, the world’s biggest emitter of greenhouse gases such as carbon dioxide, leads the world in coal-fired generation capacity — solar is but a fraction of its overall energy portfolio.

And that solar capacity often sits idle.

China is making lots of PV panels. But it’s not making much money amid a global solar panel glut.

Meanwhile, major advances in the technology that could make solar as well as wind truly viable on a mass-consumer or even utility scale continue to be made in these United States.

Researchers at the University of Texas at Austin, for example, recently published a paper describing a way of making lithium-sulfur batteries — which, says a Futurism report, are “capable of storing as much as five times more energy than lithium-ion batteries” — that maximizes efficiency.

The economic opportunity is not necessarily in the manufacture of PV panels.

It lies in the adoption by traditionally risk-averse entities such as U.S. public utilities of new technologies.

That PV costs are plummeting is enough for utilities to ask, as Michael Bolen of the Electric Power Research Institute put it for Fialka, “How can we take solar and put it into the generation mix and into the rate base in some form or fashion?”

We’re moving out to the era of the government mandate — at least in the United States.

Upticks, Downticks

Downtick The Russell 2000 Index lost 1.2% last week, with a slow decline on Monday and Tuesday accelerating on Wednesday following the release of the Federal Open Market Committee’s policy statement. A sharp rebound at Thursday’s open put to rest fears of higher interest rates’ longer-term impact on small-cap stocks. Meanwhile, the Russell 2000 is still up more than 20% for the year.

Uptick The Fed raised its benchmark interest rate by 25 basis points, to a range of 0.5–0.75%. It’s the first increase to the federal funds rate in a year and only the second in the last decade.

Downtick Gold declined by nearly 3% last week and is now down by nearly 12% since Donald Trump’s surprise victory in the U.S. presidential election.

Uptick The yield on the 10-year U.S. Treasury note exceeded 2.5% for the first time in more than two years on Wednesday, December 14. In July, the 10-year yield hit an all-time low of 1.34%. The yield on the benchmark has nearly doubled in five months and now sits at 2.58%.

Downtick Interesting historic point courtesy of “Downtown” Josh Brown of The Reformed Broker: “Every ‘Unified Republican Government’ Ever Has Led to a Financial Crash.” Josh links to work done by the anonymous blogger Wall Street Ranter:

In fact, the ONLY THREE PERIODS of extended unified Republican governments going back to 1900 ALL DIRECTLY led to banking crises… Arguably the three worst in U.S. history. To be clear, I am defining “extended” unified governments as anytime they control the House, Senate and White House for at least four years. This does not include short two-year stints since it’s hard to screw things up that quick (FYI: There was only one period of that anyway, 1953–55.) You can look up the periods yourself here and more detail here.

Uptick The IHS Markit Flash U.S. Manufacturing PMI reached a 21-month high during December. “U.S. manufacturers reported a strong end to 2016, with business conditions improving at the fastest pace since March 2015.” The manufacturing purchasing managers’ index ticked up to 54.2 in December, from 54.1 in November, as the recovery from the May 2016 post-crisis low of 50.7 continued.

Downtick Lockheed Martin Corp. (LMT) suffered a 3% sell-off from its Friday, December 9, close to its Monday, December 12, open after President-elect Trump tweeted, “The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th.” The stock plumbed as low as $245.50 last Monday.

Uptick Bespoke Investment Group: “Last Wednesday, the combined market cap of the S&P 500’s members crossed $20 trillion for the first time ever.”

Downtick Here’s a great question, posed by Doug Kass: “What Would Bertrand Russell Say About Russell Index?” Kass, who in addition to his prolific commentary on markets and everything that informs their movements, is president of Seabreeze Partners Management Inc., suggests the “priced to perfection” Russell 2000 index (created in 1984 by researchers at Russell Investments, founded by Frank Russell in 1936 and not actually named for the British philosopher) is a ripe short in the current environment and offers a specific recommendation to that effect. Kass summarizes Bertrand in an epigraph: “The whole problem with the world is that fools and fanatics are always so sure of themselves, and wiser people are full of doubts.”

UptickThat Craig Sager has died is no cause for an “uptick.” That he said this in September, during treatment, including his third bone marrow transplant with stem cells to fight the acute myeloid leukemia he was diagnosed with in April 2014, certainly is: “Man, life is too beautiful, too wonderful, there’s just too many things. It’s not just you. It’s your family and kids and all. Fight. Fight until the end. Fight as hard as you can.”

Smart Investing,

David Dittman
Editorial Director, Wall Street Daily

David Dittman

, Contributing Writer

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