Out of the spotlight, solar will thrive

A US energy policy that largely ignores solar power will, ironically, help the sector by giving it time to catch up with demand. That's good for investors, too.

By Jim Jubak

Government neglect could make 2008 and 2009 the best years ever for solar companies -- and for those who invest in them.

That's right. Long-term prospects for the solar industry are actually brighter because the energy bill that President Bush signed Dec. 19 didn't launch a crash program to expand solar-energy use or even extend solar tax credits that will expire in October.

The solar industry had a problem in 2007, and it wasn't a lack of demand. Global solar production, measured by the megawatts of power that solar cells and modules produce once they're hooked up to the grids, climbed 57% in 2004, according to investment bank Jefferies International. And it increased 30% in 2005, 35% in 2006 and a projected 13% in 2007.

See a problem there? Young growth industries facing a virtually untapped market shouldn't show slowing growth rates. If solar has the potential its supporters say it does -- and I agree it does -- the industry's growth rate should be accelerating, not dropping. (Global solar installations, which always lag equipment production and which are growing from a smaller base because of that lag, climbed a projected 60% in 2007.)

Not enough raw materials

So what happened? Beginning in 2005, demand for silicon from solar-wafer, solar-cell and solar-module makers overwhelmed supply from the companies that provide silicon to the solar and semiconductor industries.

(Solar wafers are processed silicon that's been cut into pieces, the first stage in producing solar cells. Wafers are doped with materials such as boron and phosphorus to turn them into cells that will generate flows of electrons when exposed to sunlight. When cells are placed in metal frames protected with rubber or plastic and embedded in a protective coating, they become solar modules.)