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June 23, 2008

The Sunny Side of the Street: Investing in Solar
    by Anne Moore Odell

More investors are seeing the benefits of buying solar stocks, whether to diversify portfolios or to champion an energy movement. -- Solar energy is clean energy's rising star, leading the pack in renewable energy investments last year. The Solar Energy Industries Association ( SEIA) reports that 254 megawatts of photovoltaic and concentrating solar power were installed in 2007. The solar energy sector has grown substantially over the past 25 years. At the same time, some investors have also seen substantial growth in their solar-related investments.

SRI Mutual Funds Guide"Solar energy equipment can be deployed to create power in several ways, thus one can diversify investment within the sector," said Monique Hanis, director of communications at SEIA.

Solar is experiencing growing support from the local, state, and federal governments. New Jersey, Florida, Maryland, New York, Nevada, North Carolina, Washington, and New Mexico have all increased their solar energy incentive programs. Other states have passed laws dictating that more energy be from renewable sources. California has mandated that utilities generate 20% of their energy from renewables by 2010 with that figure rising to 33% by 2017.

On a federal level, the US congress is working to address climate change and carbon emissions, which will also play into supporting solar. However, the US is only fourth in the world for solar installations. Germany, Japan and Spain lead in solar installations. Germany, although not in a particularly sunny location, leads the world in solar usage due in large part to Germany's solar subsidies.

"US will eventually legislate a solution for carbon emissions," said Hanis. "Hopefully it will fairly penalize polluting sources with high emissions and give credit to clean, renewable sources."

One of the most important questions for investors is if solar can reach grid parity. In other words, when solar will be able to compete with traditional, carbon based energy sources, watt for watt, in terms of production and cost.

Another question raised by investors is what will happen if oil prices fall? Will the interest in solar energy diminish? Hanis doesn't share this fear. In answer to this question, she said," I'm more worried that the US will lose its technology and business leadership and miss out on a huge job and investment opportunity to build the clean-tech sector here."

For investment purposes, solar energy companies can be divided into photovoltaics (PV) and Concentrating Solar Power (CSP). Both of these technologies are used to produce electricity.

PV solar technologies use thin silicon layers to harness light photons from the sun to produce electricity. A number of new low cost "thin film" technologies are emerging, as well.

For example, First Solar's (ticker: SPWR) thin film PV has led to the lowest cost per watt of any publicly traded company. First Solar reported their annual revenues moved from $52.7 million in 2006 to $200.8 million by at the end of 2007.

PVs can be used to charge batteries for powering off-grid homes and businesses. PV panels can also be tied directly into the power grid, letting people forgo batteries to store their solar generated power. Grid-inverters hook right into a home's main service panel and allows the PV-generated electricity to flow into the shared power grid. This arrangement reverses meter and enables homeowners to reduce or eliminate their electric utility bill.

The CSP or solar thermal power plants generate electricity by concentrating the sun's energy to produce steam, which is used to drive turbines and generators. SEIA reports that CSP increased 18% in 2007 in the US due in large part to Nevada Solar One coming online June 2007. It is the first utility-scale CSP plant placed in service since the last Mohave Desert plant was completed in 1991. The largest CSP project in the world is currently being built by Spain-based Abengoa Solar for Arizona Public Service.

Solar Millennium AG is a German-based global solar company with a focus on solar thermal power plants. Together with its subsidiaries, Solar Millennium has specialized in parabolic trough power plants. Solar Millennium covers all of the important business sectors within the value-added chain of solar thermal power plants, from the project development to the technology, from the turnkey construction of the plants to the operation and ownership of power plants.

Solar Millennium has developed Europe's first parabolic trough power plants in Spain, with two of the plants already under construction. Further projects with a capacity of several hundred megawatts are currently being planned worldwide in Spain, the United States, China, and North Africa. The company is also developing solar chimney power plants with the aim of making this technology ready for the market.

The interest in solar thermal power is growing by all stakeholder groups, especially by shareholders, power authorities, politicians, and institutional investors. Said Sven Moormann, head of corporate communications for Solar Millennium, "Solar thermal power plants are able to replace conventional, fossil-fuel power plants. They can generate cost-effective electricity on demand using heat energy captured from solar radiation."

As more solar manufacturers increase their production, the cost of producing electricity per watt decreases. Solar companies are creating new technologies that use less silicon, which also decreases costs. As demand for solar products continues to grow, solar companies are seeing dramatic increases in revenue. SEIA reports that PV installations grew 48.5% last year in US, led by large installations by military and big-box retailers such as Wal-Mart, Best Buy, and others. Likewise, CSP projects are growing rapidly, with 4,500 megawatts of CSP powered projects in the pipeline.

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