• 5 minutes China Faces Economic Collapse
  • 8 minutes ZeroHedge: Oil And Gas Bankruptcies To Accelerate As $137 Billion Debt Matures Over Next Two Years
  • 11 minutes Trump Will Win In 2020
  • 14 minutes Oil Production Growth In U.S. Grinds To A Halt
  • 3 hours The Belt & Road Initiative: A Wolf in Sheep's Clothing?
  • 1 hour Drone attacks cause fire at two Saudi Aramco facilities, blaze now under control
  • 8 hours How OPEC and OECD play their role in setting oil price in light of Iranian oil sanction ?? Does the world agree with Iran's oil sanctions ???
  • 5 hours Cost of oil
  • 36 mins Democrats and Gun Views
  • 15 hours Swedish Behavioral Scientist Suggests Eating Humans to ‘Save the Planet’ from Climate Change. What could possibly go wrong?
  • 15 hours Trump Orders Biofuel Boost
  • 10 hours Iran says tanker oil sold at sea, buyer sets destination
  • 46 mins US and China are already in a full economic war and this battle for global hegemony is a little bit frightening
  • 19 hours Used Thin Film Solar Panels at 15 Cents per Watt
  • 18 hours Green New Deal Preview in Texas Town
  • 16 hours “Who’s going to bail out the Central Banks?”
  • 28 mins Iran in the world market
Alt Text

U.S. Plays ‘Whac-a-Mole’ Game With Iran

The U.S. continues to impose…

Alt Text

Is It Time To Go Long On Natural Gas?

Buying natural gas futures in…

Alt Text

Oil Demand Growth Weakest In Nearly A Decade

Global oil demand continues to…

Michael McDonald

Michael McDonald

Michael is an assistant professor of finance and a frequent consultant to companies regarding capital structure decisions and investments. He holds a PhD in finance…

More Info

Premium Content

Will Solar Stocks See A DotCom Style Bubble?

Solar power is starting to look a little like the internet – way overhyped at first, generally unprofitable initially, but eventually a really big deal. Only time will tell what happens in the space of course, but there are indications that solar is becoming a seriously viable industry in the long-term.

One of the best indications that solar is becoming a real business is the adoption of large scale solar by various big companies. For instance, the SEIA recently noted that solar use by major firms the group tracks expanded from 300 MW in 2012 to over 1 GW in 2016. That total represents 16 percent of all non-residential, non-utility-scale solar PV capacity in the U.S.

Solar power is being particularly adopted by mass big box retailers – Walmart and Target for instance are the largest two users of solar according to the SEIA with 147.5 MW and 145 MW respectively. That makes sense as the large flat roofs of big box stores present an obvious opportunity for solar, and the firm’s low cost of capital thanks to a stable business model means that installing solar should be profitable at most reasonable price points.

(Click to enlarge) Related: Why The Oil Industry Shouldn’t Fear Peak Demand

The chart above shows the biggest corporate users of solar power. Apple, the number four company on the list of biggest solar users, might be installing solar panels to curry favor and environmental credit with its customer base. However, it is very unlikely that Walmart or Walgreens customers, for example, care whether those firms use solar power – solar installations in these situations are going to be done because they are economically sensible, not because they have environmental benefits.

Solar is being widely used by corporations across many of their facilities. Almost a third of Target stores and General Motors plants have solar power installations. These facilities are particularly concentrated in the Northeast and on the West coast. The sunny West Coast probably derives its installations largely from economic benefits, whereas in the Northeast a combination of high local power prices and state government incentives may be behind the installations. None of this is to say that solar power has run out of attractive installation options though. Only 7 percent of Walmart’s more than 5,000 facilities have solar power installed, while only 2 percent of Albertson’s supermarkets roughly 2,000 locations have solar installed.

(Click to enlarge) Related: OPEC Deal Could Trigger Drilling Boom In U.S. Shale

The broader point is that solar power is being used in a variety of settings by businesses and that is a sign that the installations have durable economic value. Companies do not invest large amounts of money into long term capital goods like solar panels without confidence that the projects will pay off over time. As these projects have picked up steam though, it helps to drive down the costs for future projects due to economies of scale.

Yet investors need to be very careful when choosing stocks in the space. Even if solar power really is a durable industry that is here to stay, none of this is any guarantee that solar companies today are a good investment. Those who remember the internet bubble will recall that the vast majority of internet companies failed in the bursting of DotCom bubble. Amazon has been a major player since the start, but other winners like Google and Facebook did not emerge until much later. Similarly, numerous early firms in the space failed while others fell behind new entrants. The same pattern may emerge in solar. Investor beware.

By Michael McDonald of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage



Leave a comment
  • Jim Decker on December 03 2016 said:
    Cut out the tax credits, incentives, mandates and political pressure and this goes to zero in a flash.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play