Solar energy has been an investing nightmare since the financial crisis. Due to the failure of Solyndra, and the lack of subsidies as the government instead focuses on the failing economy, the solar industry has been burned. In 2011, solar was down over 60% and down another 30% in 2012, but this year First Solar may have finally turned things around for this dying industry [for more alternative energy news and analysis subscribe to our free newsletter].
First Solar in the Driver’s Seat
Formed in 1999 after True North Partners acquired Solar Cells, First Solar went public seven years later to become the first pure alternative energy company to be a component of the S&P 500. Even during the recession, First Solar received a number of awards commending its continuing growth while other firms were dying or being overrun by Chinese alternatives [also see The Trillion Dollar Commodity Investment You Are Missing].
First Solar’s main business comes from the development of photovoltaic modules, which utilize cadmium telluride (CdTe) as a semiconductor for power. This departs from the norm of the industry, as silicon-based modules were until recently considered more efficient, but First Solar announced earlier this year that it has solved this discrepancy. The new standard panels have improved the efficiency rate from 13% to 16%, making them far more competitive with their silicon counterparts.
Even before this announcement, First Solar was on its way up, reporting amazing earnings last quarter, causing its stock price to jump and bring other solar and alternative energy funds along for the ride. FSLR is up nearly 60% this year and TAN, one of the most heavily traded alternative energy ETFs, is up over 47%, largely guided by FSLR. While these huge leaps back to relevance have been great for the alternative energy space, now that FSLR has gotten everyone so excited, it will need to live up to big expectations to keep solar in the forefront [also see Which Solar ETF Is Right For You: TAN vs KWT].
Disclosure: No positions at time of writing.