Out of the spotlight, solar will thrive

So why do I say U.S. government neglect, which puts existing federal subsidies in jeopardy and postpones plans to raise subsidies, is a good thing for the solar industry?

Two reasons:

• Existing subsidies in Germany, Spain, South Korea, Greece and individual U.S. states such as California will generate enough demand to keep solar efficiencies climbing and solar costs dropping this year.

• The delay in increasing U.S. subsidies avoided creating more demand than the industry could meet during the silicon supply crunch. A big surge in demand would have produced runaway silicon price increases and the kind of disruption that could set back an industry for years.

With the bottleneck likely behind it, the industry looks like it's ready to ramp up to meet a surge in demand that will result from an extension and increase in U.S. subsidies and new directives in China to increase the use of solar power. The Beijing government has decreed that utilities generate 5% of their electricity from renewable sources by 2010 and 10% by 2020 (and hydroelectricity doesn't count). That could result in 6 gigawatts of annual demand -- roughly 50% more than total global installed solar-power systems in 2007 -- if even 25% of those renewables were solar.

Beijing hasn't yet provided any money to back up its decree, making the real rate of adoption slower than projected, but I still think the global solar industry can expect to see demand from China gradually kick in over the next few years.

Nuclear power to benefit, too

And then there's the potential boost from nuclear power. I know, I know. Nuclear and solar are normally placed on opposite ends of the power-supply spectrum. But in a world increasingly likely to need a crash solution for reducing carbon emissions to combat global climate change, solar and nuclear are privileged front-runners. They both easily tie into the existing electrical grids, so nobody needs to build another distribution network.

The end product, electricity, can be used to reduce emissions in the carbon-intensive transportation sector. And that end product works equally well with proposed solutions such as electric or hydrogen-powered cars (where carbon-free electricity is essential for the production of hydrogen).

At the moment, I'd say nuclear and solar are dual-tracked. They're both seen as possible solutions by different constituencies. Nuclear has an edge in many government circles because it seems best-suited for generating a lot of carbon-free electricity quickly. That's why efforts to expand nuclear power in the United Kingdom and the U.S. are getting more government attention than solar.

But there's a good chance solar could move up in the list of favored government rankings because nuclear may not be able to deliver on schedule. The nuclear industry has its own bottleneck: Because no nuclear plants have been built anywhere in the world for 15 years, the industry has a severe shortage of engineers, component fabricators and equipment suppliers. It's a lot harder to solve that kind of bottleneck than it is to simply increase the supply of silicon. The first takes training a generation of engineers; the second takes three years or so to build a factory.

Timelines for crash solutions

Look at the proposed government schedule in the United Kingdom, a country on the edge of giving the green light to a new generation of nuclear plants. A 2009 study would identify sites for new plants. Construction wouldn't begin until 2012. And construction wouldn't finish, depending on how many other countries around the world had also launched crash nuclear programs, for three to five years after that.

As crash solutions go, that timetable leaves a lot to be desired. I'd guess that by about 2010, governments around the world will be eager to hedge their bets by launching crash solar programs.

Current projections of 25% to 35% annual growth in solar installations for the next decade would turn out to be pretty conservative in that scenario.

My three solar picks -- wait to buy these until the market settles down -- are:

• Q-Cells (QCLSF, news, msgs), a German company that is the world's largest producer of solar cells from conventional silicon.

• Suntech Power Holdings (STP, news, msgs), the most promising Chinese producer of solar cells.

• First Solar (FSLR, news, msgs), a leading maker of solar cells using thin-film technologies that promise to cut the cost of solar cells.

Continued: Updates and developments

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