Email of the day (1)
Comment of the Day

August 15 2013

Commentary by Eoin Treacy

Email of the day (1)

on solar innovation
"Thank you for the chart showing the efficiency of various types of solar panel. Here is a popular press article just published making the point that solar is now nearly ready to compete - without subsidy - even with low priced coal and gas.

"The technology is advancing rapidly and there are more recent advances not mentioned in the chart nor the newspaper article. Graphene may have the potential to trump the best of existing technology by delivering over 60% efficiency in capture of sunlight.

“So, no need for those ugly inefficient subsidized windmills!

“I observe that the share price of some solar power companies has sky-rocketed in recent months, with some being up 4-5x this year.

“What a wonderful age of opportunity we live in!"

Eoin Treacy's view I share your optimism about the future and thank you for these informative articles which help to highlight the pace of technological innovation in solar cells and how this is altering perceptions of the sector's viability for electricity production. As you point out solar cell manufacturer shares have been rallying impressively since January. (Also see Comment of the Day on July 19th) It is worth considering the cause and effect of the rally in renewable energy shares.

The majority of solar and wind shares declined sharply from 2008 as the credit on which they relied disappeared. The majority staged a partial recovery in 2009 and 2010 but collapsed to even lower levels by late 2012.. This additional decline stemmed in no small part from Chinese companies grabbing market share by leveraging their cheap cost of production and flooding the market with supply. This helped to drive down the cost of installing wind turbines and solar cells without any meaningful change in the efficiency of the product.

From the reports I've seen, one of the reasons that solar and wind shares are recovering is because the oversupply of inventory has been depleted and the surviving companies are gaining greater pricing power. The majority are susceptible to mean reversion following what have been very impressive advances this year.

This is a somewhat different story from the pace of technological innovation that is going on in the background of the solar sector. As you point out, the advent of graphene based solar cells could massively increase how well they convert sunlight into electricity. The cost of producing such products can be expected to be comparatively high to begin with and to trend lower over time; just as we saw with microchips over the decades. I recently read “Abundance: The future is better than you think” by Peter Diamandis and Steven Kotler. The book explains in easy to grasp terms, the exponential pace of technological development and how developments can occur quicker than many anticipate. In my opinion it's worth taking the time to read because it helps to aggregate the various technological innovation themes currently in motion.

While companies such as Graphene Technologies are pioneering the mass production of graphene, it will take time to perfect the process, to build manufacturing scale and to develop cost effective products from the material. The pace of innovation is such that a positive outcome is becoming increasingly more likely. What we do not know is how long it will take. These types of nanotechnologies represent a revolution in the making for the materials sector. (Also see Comment of the Day on February 12th)

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