Oscillating. That’s what a friend of mine called it.
“What’s the market doing?” I would ask him. “It’s oscillating!” he would say with a glint in his eye, wagging his finger quickly up and down. Oscillation is when you’ve just had a big extended move. And then the market switches hard against the trend. And then it switches back, but it can’t break loose and continue the trend. And then it switches back again.
One day the sellers win. The next day, the buyers. It’s a volatile, saw-tooth pattern on the chart. And it marks the end of a trend.
Markets can oscillate at the top or at the bottom. It applies to anything that trades, stocks, bonds, commodities etc. Some of them appear to be oscillating now.
Oscillating Sound Wave
In the world of solar power, prices for silicon and silicon based solar cells have been dropping like a rock. Overcapacity has forced prices down and manufacturers are gushing red ink. When you bleed too much, you eventually die.
Two weeks ago, Suntech Power Holdings, a Chinese company and one of the giant solar panel manufacturers defaulted on $541 million worth of bonds.
Suntech was more leveraged and therefore more vulnerable than competitors. But many other solar panel manufacturers are losing lots of money, and that means more trouble.
Last week, Bosch, the large German car parts maker declared that it will stop manufacturing solar cells and sell parts of its solar panel division. This division lost 1 billion Euros last year.
These bankruptcies and multiple losses are occurring at the same time that the solar power business is actually booming. According to thinkprogress.org, worldwide installations of photovoltaic electric systems in 2012 amounted to a record 30.9 gigawatts of capacity, an increase from 29.6 Gigawatts in 2011.
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But the total revenues for photovoltaic installations decreased from $91.6 billion in 2011 to $79.7 billion in 2012. They are selling and installing more solar panels, but at lower prices.
Solar markets are oscillating geographically. Generous government subsidies for renewable energy in Europe are being slashed, and solar installations in this big market are dropping. But in Australia, where there is lots of sun and lots of worry about global warming, solar power installations are booming and are expected to grow to annual rate of between 6 and 10 Gigawatts of capacity by 2017.
Besides the boom in Australia, Japan is growing solar installations, post Fukushima. And much of Asia besides China is just beginning to ramp up solar installations. Even the oil soaked Middle East is beginning to harness some of that region’s tremendous potential for solar generated electricity. According to Bloomberg, Abu Dhabi, which has the vast majority of oil reserves in the United Arab Emirates, is beginning to install solar farms and hopes to generate at least 7% of the country’s electricity from renewable sources by 2020.
So as the European market becomes less important in the worldwide solar scheme of things, other parts of the globe are increasing demand.
Suntech Power Holdings will likely not be the last big bankruptcy in the business. There is still huge overcapacity for solar panel manufacturing in China. But overall demand continues to grow as lower prices make solar generated electricity viable where it wasn’t just a couple of years ago.
That’s the way markets are supposed to work. Heavy competition forces prices down. Companies go bankrupt. Excess capacity begins to shut down. Lower prices increase demand. Eventually prices stabilize. The mood of the market switches from despair to hope. That’s oscillation, and the savage beauty of capitalism.
Natcore Technology Inc.
Brien Lundin is co-founder and Chairman of the Board of Directors of a company called Natcore Technology. Brien also publishes the Gold Newsletter and I met him at the recent PDAC mining conference in Toronto where he told me about Natcore.
Natcore is a research company in the solar cell business. Natcore has an exclusive licence from Rice University for a process that allows growing thin films of silicon or germanium on various substrates using a mild chemical bath.
That technology leads to Natcore 's work on two processes , either of which could change the way solar cells are manufactured. One process is the company’s method for producing black silicon. Natcore has come up with the first truly black silicon cell in a scalable technology.
Black silicon is highly textured so it absorbs more light and therefore converts more of it into electricity. Black silicon has low reflectivity and this helps with electricity production when the sun is at an angle, in the morning or the evening. Because of these factors, black silicon can improve efficiency of solar cells in converting electricity by up to 1%, and increase power output by 3% – 10% versus regular silicon.
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That may not sound like much, but in a highly competitive commodity business, having a 10% edge over your competitors is an absolute knock-out punch.
Last July, Natcore raised $2.5 million to finance more research and produce black silicon in the company’s own lab - a process Natcore had to farm out previously. The company is working with the Department of Energy’s National Renewable Energy Laboratory (NREL) to conduct cooperative research on Natcore’s patented technology for creating black silicon wafers, and use that material in solar cells.
According to Eric Payne, NREL's Senior Licensing Executive, "Natcore is the nearest-term and best partner for commercialization of the black silicon technology."
NREL currently holds the efficiency record for black silicon solar cells, converting 18.2% of the suns energy hitting the solar cell into electricity. But the lab used an expensive thermal oxidation process to create the cells. Natcore’s technology for liquid phase deposition could substantially improve the commercial viability of black silicon.
Further in the future, Natcore’s second focus is working on creating tandem solar cells using quantum dots. If you get two layers of thickness in the photovoltaic material, you could get 30% efficiency in a solar cell – almost twice the current efficiency. Natcore is researching processes that arrange molecules like shaking ping pong balls in a cardboard box and having them settle evenly. The process could lead to the manufacture of tandem solar cells.
Natcore has turned down the offer of a joint venture with a large Chinese solar panel manufacturer. Though not averse to doing deals, the company is waiting to prove up some of its technology so it can be in a position to make a better deal in the future.
The company has top notch research scientists working on these projects and currently holds 11 patents for manufacturing processes – patents that might prove valuable if Natcore proves its technology can give solar cell manufacturers an advantage.
Natcore Technology 2 Yr. Chart: Source - Bigcharts.com
Natcore closed at $0.84 Can. on Thursday. There is plenty of risk with the stock. There is still a ways to go before the company can prove that its technology is useful and commercially viable. Natcore will need financing to continue its research work. Like a mining exploration company, there are no revenues.
In the end, the technology may not work as hoped. Or, another company may come along with a different process for converting sun rays into electricity, something that blows Natcore’s process (and stock) out of the water.
But if Natcore’s technology proves successful, the upside is tremendous. Like investing in mining exploration companies, it's a walk on the wild side.
Intense competition is what is driving photovoltaic technology to be better, cheaper and bigger in the long run.
By. Dave Zgodzinski