Interesting Q1 2013 newsletter from the fund management house GMO.
In particular, they call for the Moore law to apply to solar power and make it competitive by 2025.
It is true that a solar panel cost has fallen by 60% in two years given the reductions in subsidies. This is driving a lot of firms out of the market. Since it is a fixed cost game, the extra volumes given to the survivors should contribute to lower unit costs further and speed adoption.
The back-up power will be provided by a mix of biomass and gas powered stations.
If GMO is right, it has the following implications:
- Non renewable / gas asset base will see their economic advantage wane quickly: check whether the utility company you invest in has just put in operation new power stations as they may never cover their cost of capital. Old depreciated asset bases are to be favoured as they already cover their capital cost. So that excludes the likes of EOn, which invested massively only recently.
- New entrants should have a competitive advantage since their capital costs will be much lower while their operating costs will be similar. In sum, they will be able to have larger asset bases for the same money.
- Smart grid will be vitals and heavier investment may occur a few years from now. This is negative for ABB, Alstom and co in the short run.
- Energy storage solutions will be heavily bid for and it is probable that a number of start-ups will be listed and taken over quickly. They will probably be a hot investment area.
- Africa will probably be the place where solar is going to gain quick traction given the impending energy needs, the lack of grid and its insolation. I do not know stocks to play that theme yet. Do you?
Below, you can see the cost curves according to GMO.
No comments:
Post a Comment