Solar energy is not the future of energy, SUNE will not be the last company to collapse in this sector.
The solar industry cannot survive without government subsidies.
Falling oil/natural gas prices and the advent of shale indicate that the fate of solar energy is sealed.
Solar is not the future of energy.
I recently made an article on the topic of SunEdison (NYSE:SUNE) and renewable energy in general.
This article received massive backlash, some of which was reasonable but most of which came from SUNE investors who are unwilling to accept the fact that they made bad investment. Instead taking every criticism of the company as a personal attack.
Many asserted that my position is incorrect, under researched and underdeveloped. They argue that renewable energy does in fact have a future and that I just don't have all the information. Well I am here to reiterate: No it doesn't. At least not in solar energy. SUNE was the canary in the coal mine for an industry that is fundamentally unsound. I will present to you the numbers that led me to this conclusion and let you decide for yourself.
The first rule of investing is to make decisions with your mind not your heart. Investing with your emotions is the best way to lose your money. While I love the environment as much as anyone it is simply not logical to let this feeling drive me to make unsound investments.
-Solar cannot survive without government subsidies. Take away the punch bowl and the sector collapses.
-Solar cannot complete with fossil fuels.
-Solar energy is not clean, nor is it renewable.
Betting on solar is betting on politics:
This is an industry where the government picks the winners and losers and when Uncle Sam leaves the room everyone will collapse.
We saw how the government killed YingLi Solar (NYSE:YGE) with protectionist policies. Subsidizing domestic companies at the expense of this Chinese producer. YGE Chart
And soon politics will kill all the rest.
The federal government has provided wind and solar developers with as much as 24 billion dollars in subsidies between 2008 and 2014. This subsidy is set to end in 2016. Panic that the punch bowl would be taken away was the MAIN factor that pushed SUNE and its rivals into frantic spending sprees, developments and acquisitions. Driving them into debt and towards eventual collapse.
Bloomberg New Energy Finance (BNEF) expects solar installation production to drop by as much as 70% when the government subsidies end.
This is estimated to cost the solar industry 100,000 jobs and end 25 billion dollars of economic activity. Worst off all, when solar energy welfare is gone how on earth will they compete with their number one rival?
Solar energy cannot compete with fossil fuels. Not now not ever:
As the events of 2015 and 2016 have demonstrated peak oil is a myth. The day when the world runs out of fossil fuels is extremely far away and most likely long past any of our lifetimes.
Without subsidies solar energy is 40% more expensive than fossil fuels. The price of oil has demonstrated that is it capable of falling further than anyone would have imagined 10 years ago when the frantic push and over-investment in renewable energy began.
Solar energy cannot compete with $40 oil and cheap natural gas. To make matters worse fracking has imposed a new ceiling on fossil fuel prices, making it very unlikely that they will ever rise to a level where solar energy is competitive again.
Shale basins are vast, spanning every continent and representing trillions in cubic feet of affordable fossil energy.
Solar energy is not even clean or renewable:
This is the final nail in the coffin and the reason why even environmentalists should disregard solar energy. It is not clean or renewable. Solar panels are made with silicon, a material that needs to be mined and processed via the use of fossil fuels. On top of this silicon itself is not renewable (although it is plentiful).
If that was not bad enough, we now know that creating the panels results in the production of caustic chemicals like Sodium hydroxide and hydrofluoric acid. Chinese Panel maker Jinko Solar has been investigated for dumping toxic waste chemicals into the environment.
This is not what green energy looks like. This is "feel good" energy that hides its true environmental cost for the benefit of people who are unwilling to accept the truth.
If you are bullish on the solar industry buy SunEdison stock and see where that gets you.
SUNE was the first in a long line of domino's tumbling towards bankruptcy. As for me, words cannot describe how far away I am keeping my money from this house of cards industry. Solar is not the future of energy, its just a money pit for feel good investors.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am not short SUNE and I am not long fossil fuels. This article expresses my legitimate opinions and has been arrived at through objective means. I formed my position about the state of the solar energy industry through firsthand experience with residential panels. Investors who love solar so much should consider putting it in their homes before they tell me how good it is. Thanks for reading, as always I look forward to feedback and suggestions.
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