Energy Futures: Solar or Wind

With all the hohum about renewable energy especially about ethanol, solar and wind power are basking in the reflected limelight. For decades, we have known solar and wind energy to be highly expensive sources of energy as compared to fossil fuels even with government subsidies, thus the renewable concept was never widely harnessed. However, current projections from energy industry analysts have solar and wind energy to play an increasingly competitive role in the energy market by 2011.

Soaring utility bills as a result of $70 plus/barrel crude oil prices is starting to make large up-front investments to install solar panels more consumer viable. More abundant silicon supply and cheaper thin film semiconductor solar panels has allowed cheaper installation of solar panels to homes and appliances. Solar panel roof installations on residential property average about $30k-40k after consumer rebates and credits. A consumer takes typically 8-10 years to realize the cost savings from paying traditional electrical bills which in a lifetime, can amount to $140,000.

Wind farms are starting to sprout up all over Texas, California and the Northeast. Wind energy production costs have decreased to 4.5 cents per kilowatt hour from 6.1 per KWH in 1999. European wind farm operators and manufacturers of turbines and blades have orders backlog of 3-5 years and many new US wind farm operators are fighting to get their orders fulfilled elsewhere. The nascent US wind energy market is experiencing a growth in foreign investments which sees wind power as a largely untapped resource in the US.

2 of the biggest names in US Solar power are Suntech Power (STP) and Sun Power (SPWR). Each company develops its own silicon photovolataic cells and sells them to distributors all over the world. First Solar (FSLR) is a major developer of the less efficient but cheaper thin-film solar cell and generates cost savings for customers through mass production capacity. Shares of FSLR and SPWR, both US-based firms, are up 350% and 90% YTD. STP shares are biting their dust at a relatively laggard 22%.

Major oil companies performed slightly better than STP, yielding an average of 25-30% for '07 locking in another high-performing year. Meanwhile, electrical and gas bills are rising at an alarming rate. An average household spends $400/month on utilities, and this winter's bills are expected to double that amount. There seems to be no end to the sky-rocketing oil and gas prices in sight, and none is expected by industy players.

Many newly developed homes are being outfitted with solar panels and homeowners are taking the plunge by investing heavily in solar panels for their homes. Solar power seems to provide a microeconomic solution to the hefty electrical bills. On a macroeconomic level, wind power can soon contribute as much as 25% to the electrical grid capacity at little or no incremental cost other than the fixed starting investment.