Monday, February 21, 2011

Spotlight on Solar Energy - Intelligence Report

Executive Summary:
  • Rising global demand for energy is driving investment in both traditional and alternative energy sources.
  • Fear of cutbacks in European subsidies have pressured solar stocks – offering attractive valuations.
  • China’s energy demand should pick up European slack as the country sets aggressive renewable energy goals.
  • Three key solar stocks are well-positioned trading opportunities as the solar market rebounds:JA Solar Holdings (JASO), JinkoSolar Holding Co. (JKS) and ReneSola Ltd. (SOL)

In a market traditionally dominated by coal and oil, energy demand has broadened to include natural gas, nuclear power, wind, geothermal and of course solar. But despite viable alternatives entering the marketplace, an advancing global population continues to face supply challenges and the potential for energy shortages.

Recent unrest in the Middle East has added uncertainty to the mix as energy traders scramble to put together scenarios for different regime possibilities. Egypt’s revolution caught the limelight as the country has been a relatively strong US ally, and a stabilizing factor for the entire region. If Mubarak’s stranglehold on the country is replaced by a less peaceful regime, it could dramatically change the political and economic landscape.

But in addition to Egypt, unrest is popping up in other countries like Iran, Tunisia, and Algeria. Rising inflation (specifically food costs) is lighting the kindling of revolution that has sat dormant for generations. The political and economic landscape of the Middle East may experience vast change in the next 12 to 36 months.

The Effect on Alternative Energy

Significant disruptions (or even the possibility of disruptions) in traditional energy markets spurs demand for alternatives. Over the past few months, a number of non-oil energy companies like Uranium Miners, Natural Gas Producers got attractive opportunities.

Now Solar energy market is experiencing its own rebound both in terms of improving business dynamics, as well as a better trading environment for solar stocks.

The solar energy market is loosely correlated to traditional oil prices. As oil prices increase, solar energy becomes more competitive and catches the attention of investment managers. Of course there are other factors such as competition against natural gas electricity plants, as well as traditional coal economics.

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