Regardless of what you think of the current President (or the Congress, for that matter), the one thing that seems fairly apparent is that there is a growing commitment to energy independence.
I’m not going to question anyone’s motives: some are tree huggers, some are concerned about climate change, some are Libertarians, some are America-firsters, some are dittoheads.
It doesn’t matter. This is an issue that all agree on. The United States needs to build its energy independence if it’s going to remain a dominant player on the world stage for decades to come.
There may be a debate over whether that means drilling in the Arctic National Wildlife Refuge, putting oil rigs offshore, putting wind offshore, or installing solar panels on rooftops and in deserts; but the trend is in place, and it was confirmed in the President’s State of the Union address.
The Chinese Green PR Machine
It’s a good thing we’re all getting on the same page, because our chief 21st century economic competitor is back in the energy independence game as well.
A few years ago, I met a former Southern Company nuclear engineer who had started his own consulting company. One of his current contracts was consulting on building nuclear reactors in China.
“There are two things you can say about the Chinese way of doing things,” he said. “One, once they decide to build a facility, it gets built. And two, they bring it in on time.”
He noted that the building firms take great pride in their work and if they say the cement is going to be laid by a certain date, the crew works overtime and on weekends to bring it in on time (without overtime pay). He said he would see workers on weekends with their families in tow working to get it done simply to keep their word and reputation.
The one thing a command economy has going for it is that once a project it sited, it gets built. There are no environmental impact studies, no legal issues, no historical impact hearings and no worries about displaced families who may have lived on the land for centuries.
Now, it looks like the Chinese are back in the renewable energy business. In early January, government officials announced at a national energy conference that it aims to add 10 gigawatts (GW) of installed solar power capacity this year, up from 7 GW at the end of last year.
The goal for 2013 will put China within easy reach of its stated target of 21 GW of installed solar power capacity by 2015.
This has led a bull stampede on Chinese solar companies. The renewables community around the world is very excited that at least one major nation is willing to step up and stand behind its renewables industries and offer some incentives.
But even if China hits its 2013 production goals, its solar production is about as big as Germany’s 2011 production capacity. It’s smaller than the United States’, the EU’s and… well, you get the picture. What’s more, if you look at it as generation capacity per capita, it’s an even smaller amount of the energy mix.
Upon investigation, this is more likely an attempt for the Chinese government to save its fledgling solar industry in a sector slump with some good global public relations. Struggling Trina Solar (TSL) was recently written up in a piece on Greentech Media:
“Trina Solar (TSL) is “headed toward a near-term insolvency,” according to analyst Richard Pearson.
Pearson cited an array of market analysts (Raymond James, Barclays, RBC, Roth, Credit Suisse, Macquarie, China International Capital Corp, Maxim and Axiom) who saw the stock price, now at over $5.00, dipping to $3.00 or lower.”
The report came on the heels of this “major” announcement by the Chinese.
Yingli Green Energy Holding Co. Ltd. (YGE) has had a pretty solid run so far this year, and it may be a beneficiary. It’s a well-run company with solid management. Others like JinkoSolar Holding Co. Ltd. (JKS) and Suntech Power Holdings Co. Ltd. (STP) also moved on the news but have horrible charts and little hope outside China.
My take on all this: If you want to buy into renewables, stick to U.S. companies that have better backing and a lot more transparency. Plus, they have management teams that are familiar with the dynamics and politics of the domestic markets more than a foreign one.
If you want to go solar, your best bet is SolarCity Corporation (SCTY). Its initial public offering occurred just two months ago, but it’s a good long-term play on the industry. If solar catches on, SCTY will benefit.
A big, safe, diversified play is General Electric Co. (GE). Granted, GE isn’t sexy; but it’s a player in all the renewables, as well as nuclear.
On the natural gas side of things, I recommend Clean Energy Fuels Corp. (CLNE). A T. Boone Pickens enterprise, it’s strategically vertically integrated through the natural gas sector.
And here’s one long shot: Spire Corp (SPIR). It has a unique niche and may be an acquisition target for a Chinese or Indian (or U.S.) firm at some point.
— GS Early