Renewable Energy and First Solar: An Exciting Future

The global energy market has reached a point where renewable energy, particularly wind and solar, is expected to be the cheapest form of power by the year 2020. This is due to the considerable scale of investment into garnering new and more efficient technology in the industry. As standard economic theory predicts, the consequences of increasing production and exploiting the ‘economies of scale’ naturally results in a decline in the costs of bringing the product to market.

“Renewable Energy is expected to be the cheapest form of power by 2020”

For wind energy, enhanced productive efficiency is mainly a result of improved wind turbine tower technology. For instance, turbine towers now feature longer turbine blades in addition to being taller in stature. Hence, wind energy is now the cheapest form of power in the US as reported by Morgan Stanley (2017). However, the most appealing form of renewable power currently in the market is solar energy. Over the past decade, solar panel manufacturers have significantly ramped up production and competed to discover innovative ways of achieving greater levels of efficiency. Consequently, this led to the decline in the price of solar panels as the market was over-saturated with an excess supply of solar panels. However, in the first two quarters of 2017, the solar energy market maintains a strong positive outlook as earnings by major players exceeded expected levels.

One to Watch:

The main firm to keep a look out for is First Solar, an American manufacturer of solar panels. The innovative firm produces ‘Cadmium-telluride (CdTe)’ based panels allowing the cost of manufacturing to fall below $1 per watt. Additionally, First Solar is vertically integrated which allows the firm to control the production process, from obtaining raw materials to manufacturing the solar panels. The firm's share price has increased consistently from approximately US$35 to US$47 in Q2 of 2017. The recent earnings report also seems to support the claim that First Solar remains a strong buy.

However, it must be noted that the solar industry remains a fiercely competitive space. First Solar faces competition particularly by SolarCity, a company that has been recently acquired by Tesla and commands approximately a 41% share of the residential market. Nonetheless, First Solar's innovative CdTe technology should allow the firm to maintain its dominant position in the commercial as well as international arenas. 

References:

Morgan Stanley. (2017). Renewable Energy Hits Global Tipping Point. Available at: http://www.morganstanley.com/ideas/solar-wind-renewable-energy-utilities

Investopedia. (2017). SolarCity vs. First Solar: Fierce Competition in the Solar Power Market. Available at: http://www.investopedia.com/news/solarcity-versus-first-solar-tsla-fslr/

Goldman Sachs (2017). The wind and solar boom. Available at: http://www.goldmansachs.com/our-thinking/pages/alberto-gandolfi-wind-and-solar-boom.html