Renewable Energies

Which is one of the less exploited renewable energy source?

The direct solar radiation.

Photovoltaic effect is the capacity of some materials to transform photon coming by the Sun directly into electricity. Looking at the total amount of energy generated by renewable sources we see that photovoltaic is by far the less important of the contributors.
On the other hand we have to think that 100 km2 of photovoltaic material placed in the middle of Sahara desert will supply the World demand of energy.

So, why this source is not exploited more?

The cost of photovoltaic material, solar panels, is the main answer. So far the dollar / watt for solar energy has not been attractive because of high prices compared to oil prices.

During last years some important changes have occurred:
-Germany and other nations has given important financial helps to people who wanted to buy and install solar systems
-Oil price incredibly rising
-Solar cell efficiency is improving thanks to new materials and new techniques (thin film, polycrystalline, ..)
-A great number of competitors have entered the market

A BBC research has shown that the global solar market is expected to grow from $13 billion to $32 billion by 2012, with thin film expanding 45% a year.
This seems to be a kind of gold mine for investors?
Or maybe it is only the next market bubble? Looking at last years index linked to these companies they have shown great grows and big returns over one years (100/200 % for some of them). Is that too late? Is it too dangerous to invest in this sector?
In every investment we know there is a risk, th great investor Hates taking risks and try in every possible way to avoid them.

Let’s have a fast look on this energy niche, let’s start with the CONS:
-solar energy is by far the most expensive of renewable energies
-solar index has already rocketed last two years according to the big earnings estimations, so all the main companies in this sector have had big over performances over last years
-Governments seem to be ready to reduce/eliminate the subventions and this will cause a big shock for the companies, is that shock already taken into account by today’s stock prices?
-There are a lot of little competitors, mainly because it is easy to enter the market because the technology needed is not too expensive/complicated.
-If you invest into Google or Goldman Sachs you will be sure to invest in two great investors in this kind of energy and you can profit of their search and analysis strength.

The PROS:
-even if the market has already rocketed, if we compare solar companies P/E with Wind companies P/E we see that by far the first one are much more cheaper than the seconds
-the market is a niche and it is so little but with a so huge potential that it’s easy to foreseen a multiple doubling of his % on total renewable energies market over next years
-there are some companies with already a good customer portfolio and international credibility with strong contracts with the main silicium suppliers for the next years.
-during the January stock exchange crisis these companies has lost a lot in terms of stock price pushing the P/E ration down, close to the fair value.

Analysing the risks of the CONS and trying to find out the best companies with the best financial statements and characteristics among the PROS the Value Finance portfolio has selected two companies working in this fields and they are part of our assets.