No. of Recommendations: 2
I couldn't figure out why, especially seeing the 1.34 million shares traded in the 5 minutes ending at 1:14 pm yesterday (and the 3.24% drop that happened in those 5 minutes). Then my colleague Matt Argersinger suggested I look at the Yahoo! message boards, which he's found helpful at times, despite their feel.

Well, it worked. Barron's reported (http://blogs.barrons.com/techtraderdaily/2011/02/28/first-so...) that First Solar shares were sliding because of a report of a draft proposal that could limit subsidies for solar installations in Italy. Italy is a fairly large market for Power-One, in case you didn't know, accounting for 19.6% of revenue in 2009 (the latest 10-K isn't out yet).

Thus the share price drop. What surprises me is the sudden decline starting about 12:40 pm considering that the draft proposal was reviewed in the Italian press over the weekend. Market inefficiency, I guess.

Even though the market doesn't believe it, I feel that the situation in Europe, specifically Germany, now Italy, and prior to that Spain, is short-term in nature. My "short-term" is a bit longer than others, however, as it could hurt the company for a year or more. However, as I have noted previously, Power-One has seen this coming and has been moving to broaden its geographic coverage, opening new plants here in the U.S. and in China. While that won't prevent the damage from Europe, it will mitigate it. We'll see what happens over the next quarter or two (or three).

Cheers,
Jim
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No. of Recommendations: 2
Jim, apropos your "short term" comment above - Piper Jaffray agrees: http://finance.yahoo.com/news/4-To-5-Per-Watt-Solar-twst-250...

tj
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Hi tj,

Thanks for the link. This part of an answer to a question made me laugh out loud (TWST = The Wall Street Transcript):

"TWST: A lot of investors are concerned about subsidy cuts as well as oversupply in the solar sector. But you don't see those as significant long-term risks. Why is that?

"Mr. Zaman: We think that there is concern about subsidy cuts and oversupply as sort of an annual ritual in the investment for investors and Street analysts that focus on the sector."


Yes, indeed. :-)


Further on in that same answer:

"So the institutional focus on just a handful of markets and really just a couple of markets, Germany and/or Italy, we think is - it's really missing the forests from the trees. Our view is that over the next few years, again as the price of solar continues to decline, subsidies will be phased out and solar will begin to be able to stand on its own feet, being at grid parity and most markets unsubsidized."

That was part of my original thinking with this company and I haven't seen a reason to change it yet.

Thanks again for the link, tj.

Cheers,
Jim
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I was intrigued with your PWER recommendation, but haven't had time to look this one up in detail yet (sitting in my "need to research" watchlist still haha). However the short sightedness of Mr Market tends to bump stocks like this ahead of the queue for me haha. I have a similar view to short-term/long-term as you do, so this company gets my more immediate attention thanks to the drop :-)

For what its worth, I love checking yahoo message boards for big swing news. I find it lacking in any constructive discussion so I do not participate (anymore), but more often than not its a good source of finding information. I get the feeling that day traders find it a great resource.

- Shaun
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Our view is that over the next few years, again as the price of solar continues to decline, subsidies will be phased out and solar will begin to be able to stand on its own feet, being at grid parity and most markets unsubsidized."

The measure here has to be panel cost -- not total installed cost. Oh, and if you want power after sundown, today's parity prices certainly don't include storage for those needs.

In the original piece it mentioned that solar was at grid parity in Hawaii. I'd love to see that study. If that were true, the government would have already mandated a change to solar.

Hawaii is probably the slowest market to move in the US. Everything is studied and studied...

If anyone would like to see what is happening in Hawaii (that is positive) regarding their entire energy problem, here is a link to video and text that covers a small group that wants to do a $2.5 billion takeover of Hawaii Electric to force the company to move away from its slow-to-implement-anything-alternative strategy (that phrase being mine).

http://damontucker.com/2011/01/08/richard-ha-on-the-buy-out-...

It is going to take bold moves like the one proposed in Hawaii to get the alternative energy movement really moving in the US. I wish these people success.

W.D.
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Oh, and if you want power after sundown, today's parity prices certainly don't include storage for those needs.

Hi W.D.,

I think it depends on if you are on the grid or not. If you're on the grid, then parity = grid price. Use the grid when the panels aren't working or providing enough (e.g. night time). If you're completely off the grid, then, sure, storage costs have to be added. I believe it's the former situation that most discussion about grid parity assumes.

Thanks for the link to Ha's interview. I wish him luck.

Cheers,
Jim
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In December, 2009, DOE predicted the grid parity costs of all new generating alternatives in 2016. The cheapest was advanced natural gas combined cycle at 79.3%. The most expensive, solar, at 396.1.

Wind, which many (including me) thought is already at grid parity, came in at 149.3 (for onshore). The reason given for the higher than grid cost was:

As mentioned, the costs shown in the table are national averages. However, there is significant local variation in costs based on local labor markets and the cost and availability of fuel or energy resources such as windy sites. For example, regional wind costs range from 91 $/MWh in the region with the best available resources in 2016 to 271 $/MWh in regions where the best sites have been claimed by 2016. Costs for wind may include additional costs associated with transmission upgrades needed to access remote resources, as well as other factors that markets may or may not internalize into the market price for wind power.

http://www.eia.doe.gov/oiaf/aeo/pdf/2016levelized_costs_aeo2...

For those wanting to have the details behind the assumtions used to build all the renewable fuels model prices, here is a link to that:

http://www.eia.gov/oiaf/aeo/assumption/renewable.html

I think when you look at the assumptions, you will realize that realistic grid-quality alternatives were used.

Solar is almost 4-times more expensive in 2016.

W.D.
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