First Solar Corporation was indeed first at something: It was
the first solar company to lose more than $15 billion of market
value. FSLR’s stock
plummeted from $140 per share a year ago, and $170 a few weeks
before that, to under $21 per share early this week before
rebounding modestly on Tuesday. In fact, $15 billion substantially
understates the peak-to-trough drop in the company’s value, as the
stock traded above $250 per share for most of 2008, briefly peaking
over $300. As of Tuesday, the company’s value was just under $2
billion; at its all-time high stock price, that number was over $25
billion.
In a
press release on Tuesday morning, the company announced that a
massive decline in its business, especially its European business,
will cause it to record about $300 million in restructuring charges
while firing 2,000 employees, about 30 percent of its total work
force. This is due primarily to Germany’s recently
cutting its solar subsidies, following a similar move in
Spain.
According to the company’s Chairman, Mike Ahearn: “After a
thorough analysis, it is clear the European market has deteriorated
to the extent that our operations there are no longer economically
sustainable, and maintaining those operations is not in the best
long-term interest of our stakeholders.”
Further: “The solar market has fundamentally changed, and we are
quickly adapting our market approach and operations to maintain and
build upon our competitive advantage,” said Ahearn. “After a period
of robust growth, First Solar is scaled to operate at higher
volumes than currently exist following the reduction of subsidies
in key legacy markets. As a result, it is essential that we reduce
production and decrease expenses to reflect the smaller volume of
high-probability demand we forecast.”
As usual, one has to wonder about certain stock analysts, with
one firm reiterating a buy (how much has that cost the firm’s
clients so far?) and Goldman Sachs cutting from buy to hold (in a
business where “better late than never” is not a wise approach).
Amusingly, the Goldman analyst’s cut preceded the stock’s biggest
percentage gain in months, as “short covering” and a sigh of relief
that the company is at least recognizing that its business is a
shadow of its former self brought buyers into the game. (Fully one
third of the company’s “float,” the number of shares issued and
available to trade, has been sold short, representing bets on the
stock price falling.)
As worldwide government balance sheets have worsened in recent
years, “renewable” energy subsidies became an unaffordable
feel-good luxury. Particularly in the U.S., with our massive
natural gas supplies, it is unlikely that solar power could ever be
a competitive electricity source in terms of cost per kilowatt-hour
without even larger subsidies than we have already seen — and
which are not likely to be tolerated by voters in this time of
Solyndra and trillion dollar deficits.
There are physical limits to improvements in solar technology so
that Moore’s
Law, which has described improvements in computer technology
(or more specifically transistor density) over recent decades, does
not apply despite the use of silicon in both. Gains in solar
efficiency, both in how well panels work and how much it costs to
make them, are limited by laws of physics, at least with all
current solar technology. In other words, most of the gains in the
price of solar electricity generation have already been achieved,
and the industry still cannot compete without subsidies.
Most Americans probably know that “renewable” energy sources
receive handouts of taxpayer money. These are true subsidies, not
the common tax deductions used by oil companies, along with many
other companies, which the left terms “subsidies.” But do we
understand the scale of these numbers and how fast they have been
growing?
According to the Institute for Energy Research,
subsidies for renewable energy (related to electricity
generation) jumped 186 percent during the three year period from FY
2007 to FY 2010. Wind was the dollar leader in terms of picking
taxpayers’ pockets, going from $476 million in 2007 to $5 billion
in 2010, making it the largest energy subsidy recipient. (Nuclear
power came in second, at half the level of wind, and coal came in
third, at less than one quarter the level of wind.) Solar, in
fourth place in absolute dollar subsidies, made a very large
percentage jump as well, going from $179 million to $1.1 billion
over that same time frame.
The above data only include federal subsidies, however. Solar
power receives state and local subsidies, including from utilities
which pass those costs along to ratepayers, far more than other
sources of power. In fact, there is a whole database of “State Incentives for
Renewable and Efficiency,” where you can find your particular
state’s waste of money on the solar swindle.
What really demands examination, however, is the subsidy per
amount of electricity produced, and by that measure solar is the
undisputed champion. Consider the top four recipients of subsidy
dollars: wind, nuclear, coal, and solar: Coal’s subsidy equates to
64 cents per megawatt hour and nuclear comes in at just over $3.
Wind subsidies cost a shocking $56 per megawatt hour. But even that
is a tremendous bargain when compared to solar which — and again
this is only the federal subsidies — costs taxpayers $775 per
megawatt hour. (What wind lacks in apparent costs, it makes up for
in slaughter
of birds, showing the true hypocrisy of so-called
“environmentalists.”)
A 2010
study by the Commonwealth Foundation of electricity costs in
Pennsylvania showed that in 2009, electricity generated by wind
cost 150 percent of the average electricity cost in the state while
solar-generated electricity cost an incredible 706 percent of the
average. Furthermore, while natural gas and oil prices declined
from the prior two years, solar and wind power costs jumped 65
percent and 92 percent, respectively.
Another IER analysis
determined that states which require a certain percentage of their
electricity production to come from renewable sources have
electricity prices “nearly 40 percent higher than states that do
not have similar mandates.”
Natural gas is more difficult to export than oil or coal because
it has to be compressed or liquefied before it is shipped. But at a
13-year low price of $2 per million BTUs, the cost is so low that
more international trade in natural gas will become economical,
putting even more pressure on solar and wind power and highlighting
the absurdity of subsidies, even without travesties like
Solyndra.
Highlighting this near-revolution in energy markets, Cheniere
Energy announced on Tuesday that the Federal Energy Regulatory
Commission (FERC) has
approved its
Sabine Pass liquid natural gas (LNG) terminal in Louisiana,
making it the nation’s first approved large exporter of natural
gas. Two other companies, Sempra Energy and Energy Transfer Equity,
also aim to build export facilities in Louisiana. Sempra announced
on Tuesday that it will spend $6 billion on its liquefied natural
gas (LNG) export terminal, which will be able to export 1.7 billion
cubic feet of LNG per day beginning in late 2016.
Tuesday was a dark day for solar power, though a day that was
obviously on the horizon. At least it would have been obvious to
anyone willing to admit that solar (and wind) has only gotten as
far as it has due to massive subsidies implemented by government
members of the Cult of Global Warming, also known as the Algore
Enrichment Society.
Unsurprisingly, some of the most committed, unquestioning (two
of the several traits of
cult members) followers of the Cult such as the Sierra Club — a
group with enough political clout, along with its co-religionists,
to convince Barack Obama to block the Keystone XL pipeline — are
already
opposing LNG exports. (According to energy author Robert Bryce,
the amount of energy that the pipeline would transport in any given
time frame would exceed the total energy produced by all solar
panels and all wind turbines in America, combined. So much for an
“all of the above” energy strategy.)
Like Energy Secretary Steven “I don’t drive a car” Chu, these
are people for whom adherence to the Cult trumps the ability of
ordinary Americans to affordably cook their food, turn on their
lights, or heat their homes. This comes from the top, of course, as
Barack Obama has made no secret of his desire to make electricity
prices “necessarily skyrocket.” If that is your goal, requiring
solar power to be an important part of the national energy mix is a
great start.
Staying in the realm of economic know-nothings, House Resources
Committee Ranking Member Edward Markey (D-MA),
with unfortunate moral support from T. Boone Pickens, says that we
should not export natural gas because it might increase prices
here. They ignore that foreign substitution of natural gas to
replace oil or coal for electricity generation will lower the
prices of those other commodities, as well as lower the atmospheric
carbon dioxide (aka “plant food”) concentrations that seem to
concern them so greatly. They also ignore that even if natural gas
prices doubled from here, it would still be a cheap form of energy,
especially compared to the cult objects of solar panels and “bird
blender” wind turbines.
First Solar’s troubles remind us of Herbert (father of
AmSpec’s own Ben) Stein’s wisdom
that “If something cannot go on forever, it will stop.” When it
comes to subsidizing renewable energy, we are now witnessing the
realization — including remarkably by European governments — that
the subsidy insanity cannot go on forever.
