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Investment Analysis Clubs / Macro Economic Trends and Risks
|Subject: Re: Dotcom déjà vu||Date: 12/13/2012 10:04 AM|
|Author: Goofyhoofy||Number: 411184 of 477960|
Goofy, the Fed's currently provide a 30% tax CREDIT for solar systems. Some states and/or utilities also provide credits. The industry is strongly dependent on these credits. Both consumers and industry spokesmen say if the credits go away, the industry will die on the vine.
With the ongoing federal budget challenges, how confident should an investor be that the Fed credit will survive ad infinitem?
Maybe not. Maybe it won't matter.
The cost of materials of solar systems has declined 30% in the past two years (hence the bankruptcy of some US manufacturers) thanks to Chinese production.
Panels used to be 90% of installed cost. That is down to 70% (68%, actually, on average.) At some point it's reasonable to think that will decline to 60%, even 50%, since production of panels is really not so significantly different than production of other silicon products mass produced on wafers with increasing efficiency year after year. There is a point at which government support for such things would become unnecessary, just as it did for silicon chips, jet aircraft design, neighborhood recycling, the internet, or lots of other things which did not stand on their own at birth.
In my view it would be terribly short sighted to drop credits for renewables and chain ourselves back to fossil extracts, although we have been terribly short sighted before (and probably will be again.) But that is just my view, which is irrelevant in such things.
As I said there are risks in this business. Regulatory: power companies may no longer be required to purchase the energy at any price. Or at reasonable price. Or at inflated price. Subsidies may disappear. Production costs may not continue to decline. Homeowners may default. Flux capacitors may be invented and take over the industry. Home nuclear plants may appear for your basement. I don't know, it's "the future."
I thought your laughter at their "losses" versus "sales" metrics was misplaced, because the business model is un-traditional (if not entirely new.) I'm sure there will be lots of risks, and they may go upside down, or prosper, I have no idea. I hope they do well, but really, I have no idea. Nor, I should point out, do writers on the internet who know almost nothing about the company, including the segment of the industry they're in.
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