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Will this hurt our Revenue Numbers?
Could Solar Power Become Too Cheap to Meter?
by Sean Brodrick, Resource Strategist, The Oxford Club
Tuesday, March 24, 2015 : Issue #2505

There is a revolution happening in solar power right now, and it’s scaring the Jumpin’ Jehoshaphat out of traditional energy providers.

We tend to think of solar as a resource - and it is, to a certain extent. But it’s mainly a technology. And as we’ve seen with other technologies - from phones to cars to computers - great leaps can take place in a short amount of time...

Leaps that greatly lower the price while at the same time improving the quality.

Here are three charts that sum up the solar power revolution. First, let’s look at this one showing the price of energy from different sources since the late 1940s.

Solar power - that plunging red line - entered the game only recently. But prices are falling so quickly that it will soon undercut even the cheapest fossil fuels, coal and natural gas.

According to Deutsche Bank, the cost of roof-top solar power is approaching parity with coal-fired electric power. That’s down from 7-to-1 just four years ago.

Here’s a look at what happened to the price of residential rooftop solar power systems in the last year alone...

The total installation costs for utility and large commercial systems in the U.S. have fallen below $2 per watt. Prices have fallen so much, you can get an entire system put in for what just the module itself would have cost in 2011.

And with prices falling, guess what’s happening to installations? You get one guess...

In 2014, the number of solar photovoltaic (PV) systems installed in the U.S. was 12 times the amount five years earlier.

Residential solar installations have grown 50% annually since 2012. Developers installed a record 6.2 gigawatts of panels last year, including about 1.2 gigawatts atop homes.

Of course, there are a couple issues slowing progress...

Storage Is the Next Hurdle
The sun may be a humongous fusion reactor, but it has limitations. For one, it shines for only part of our 24-hour cycle.

To use solar power at night, you have to store it. And so far, storage A) is expensive and B) has lagged behind other technologies.

But there are promising developments on that front, too.

U.S. solar giant SunEdison (NYSE: SUNE) recently acquired Solar Grid Storage, a startup that integrates solar installations with battery storage.
SolarCity (Nasdaq: SCTY), America’s largest solar power installer, is wrapping up installing 430 combined solar and storage systems around San Francisco. The company is also going to design and operate “microgrids” for remote towns, college campuses and even cities.
The U.S. Department of Energy is taking in proposals for $15 million worth of research projects to combine photovoltaic and storage technology.
Solar storage currently costs between $0.20 and $1 per kilowatt-hour. The goal is to lower that to $0.14 per kilowatt-hour, which would equal the projected average U.S. grid price for residential power in 2020.
So, will solar power become too cheap to meter? Probably not. But it’s going to get pretty darned cheap. Dirt cheap.

Shoveling Against the Tide
Some utilities are embracing solar power. Others are fighting it with all the ferocity of wildcats being stuffed into a burlap sack.

Arizona’s utility commission slapped a surcharge on solar homeowners designed to make solar less affordable. The same kind of thing also happened in Wisconsin. New Mexico may follow suit.

That’s because utilities, like most quasi-monopolies, hate competitive markets. And the fact is, as millions of residential and business customers go solar, utilities are beginning to see revenues decline.

Regulators in many states are owned part and parcel by the utilities they’re supposed to regulate. So sure, they’re shoveling against the tide. But the free market will likely win this one, as it usually does. And you might want to be onboard for that ride.

The Guggenheim Solar ETF (NYSE: TAN) is stuffed with great solar stocks, including Hanergy Thin Film Power Group (OTC: HNGSF), SunEdison and First Solar (Nasdaq: FSLR). It has an expense ratio of 0.76%.

TAN has been on a rocket ride for the past two months, up 40% from its low in January. So, you might want to wait for a pullback. But that’s a pullback that could be bought.

‘Cause the future’s so bright, ya gotta wear shades.

All the best,

Sean

P.S. What’s happening right now in solar is huge. Unfortunately, it doesn’t change the fact that we are - at least for the foreseeable future - dependent on oil. Foreign oil to be exact. As my colleague Dave Fessler recently pointed out, the fact that we’re producing crude in our backyard is irrelevant. Because the simple fact is we don’t have the means to refine it. Perhaps that seems like a problem that will eventually work itself out, but I’m not so sure. See, I’ve been tracking a situation that could ultimately be disastrous for our energy supply. It could devastate the U.S. economy... the stock market... even our currency. Pay attention to your inbox. I’ll have more details for you Thursday.