Suntech Power’s Day in the Sun
Suntech Power Holdings Co. Ltd. (STP) closed up 44% on eight times normal volume after the Chinese mentioned the S word. Subsidies baby, subsidies! News is still sketchy and I’ll update this post throughout the day as I learn more. For now I’ll leave you with this comment from The Motley Fool.
A statement today from the Ministry of Finance announced that China is going to subsidize solar projects in excess of 50 kilowatts (kW) of rated capacity to the tune of nearly $3 per watt. According to Jesse Pichel of Piper Jaffray, that’s enough to cover at least 60% of the cost of installation, leaving only inverters and balance-of-systems costs to contend with.
Checking the Chinese Government website the most relevant news I can find is from January 26. There may be more on the Minstry of Finance website, but I can’t even order two beers in Chinese, so that’s of little use to me.
The Chinese Academy of Sciences (CAS) has launched an initiative to boost the development of solar energy technology, in a bid to turn it into a major energy source in China by 2050.
A CAS official said that the academy had organized academicians and experts to make an action plan and will set up a platform to support scientific innovations involving solar energy.
The plan will be carried out in three phases, including “distributed utilization” by 2015, “alternative utilization” by 2025 and “large-scale utilization” by 2035, respectively.
This action plan aims to form value chain on technological innovation including basic studies, application studies and market research.
CAS experts said that China has a big potential for solar energy development. The duration of sunshine for two-thirds of its territory is more than 2,200 hours a year. It also has vast desert areas, where solar energy could be “harvested”.
via China to step up solar energy research, development
Subsidies squeeze shorts. Volume and velocity like today are generally signs of a short squeeze. Investors who are in pain will do anything to stop the pain. Think of the prices longs have been selling out for recently. Shorts are exactly the same. They are more willing to pay any price to stop the pain than long investors are to get exposure. However, today’s volume indicates there are many new investors wanting to jump on board Suntech. 22,856,454 shares changed hands, which is three times the number of shares that were short.
Read more on Suntech.
Here is a great article at Fortune on Shi Zhengrong and Suntech which highlights why I invest in Suntech. Two words Grid Parity. It is inevitable and Shi believes Suntech will get there by 2012.
Grid ParityFor Suntech that means about 14 cents per kilowatt-hour. Currently, Suntech’s cost is about 35 cents, yet Shi says that by 2012 his production line will reach his target.
How, exactly? For one thing, the scale that the solar industry has reached gives it new pricing power over suppliers. Explains Shi: “We were a parasitic industry relative to the semiconductor industry, which was the main user of silicon.” Now that’s no longer true: The solar industry uses more silicon than the chipmakers. Also, the world economic slump has driven silicon prices down sharply.
But far more important, analysts say, is increasing conversion efficiency – the amount of electricity derived from the silicon used. The rule of thumb is that every 1% increase in efficiency results in a 6% cost reduction. And in the past year, Suntech has cut costs by about 20%. In time, he says confidently, “solar will be cheaper than coal or gas.”
Related posts:
Leave your response!