The recent hurricanes to hit the southern states - Katrina, Rita and Wilma - which caused severe flooding and oil and natural gas price spikes, forced the money-conscious to seriously consider alternative means of energy.
One of the main alternatives is solar power, which remains a largely untapped resource. With the current market trends and these disasters, solar panels are poised to become a large industry.
Evergreen Solar Inc. (ESLR), based in Marlboro, Mass., is one of the main leading solar panel providers in the United States. The company is currently working on producing thinner and less expensive solar cells using a process called Thin Ribbon. The process requires less silicon than previous methods and would yield a greater profit margin.
Although the stock has had a recent run-up in its price, this is still a very strategic investment for the next three years. The current energy crisis may subside, but supplies will continue to be tight.
Demand is increasing for oil and gas throughout the world. Third world countries are developing and increasing their consumption. As a country produces more, it also consumes more resources. A prime example of this is rapidly expanding Chinese juggernaut.
The future of solar panels lies in electricity generation for the home and office. Solar panels are a one-time purchase and transfer the sun's heat energy into useable electricity in order to run numerous applications, including water pumping, communications, outdoor lighting, recreational vehicles and stand-alone or grid-connected AC applications.
Although the solar panel will probably be more expensive in the short run, if individuals plan on staying in the same location for some time, they are a very cost-effective way to get electricity into a house. The Natural Gas Weekly Update estimated the average U.S. household that uses natural gas will spend approximately $260 this winter. Natural gas prices have risen approximately 43 percent from last year, and heating oil prices have also risen substantially, with consumers expected to pay 32 percent more than usual.
Evergreen Solar Inc. is well positioned to go forward. As Americans search for cheaper ways to heat their houses in the winter and run appliances year-round, the company will be there to fill the gap in the marketplace.
ESLR's financial health is not perfect right now. It is still losing money on their product, but their total sales are increasing substantially. The company's total revenue has risen about 250 percent in the two year period from December 2002 to 2004. Costs have also increased because the company must produce, market and sell more string ribbon solar cells. But costs have only increased 140 percent during the same time period, which indicates that as ESLR sells more solar cells, the company will eventually break into the green.
This has obviously been reflected in the stock price, as it has increased substantially in value. There is still money to be made in this forward-looking solar panel. ESLR is producing thinner, more inexpensive solar panels that can be marketed to a greater number of individuals. This is going to raise their margins, pushing the company towards profitable operations.
Solar panels are not yet a necessity but they will become much more needed as countries use more and more natural resources and begin to empty reserves for energy. ESLR should expect to increase in value from its current price of $8.34 to the $12 to $15 range in a year.
Alain Digon is a sophomore who has not yet declared a major. He currently manages a relative's portfolio which contains shares of ESLR.
