Tags: solar | silver | Japan | China

The Smartest Way to Play Solar

By    |   Monday, 05 August 2013 07:48 AM

I've always liked the concept of solar energy, but it's never been a favorite of mine from an investment perspective.

Why? Solar just can't stand on its own right now without a great initial expense that typically has to be partially covered by rebates or tax benefits, etc.

You see, solar will save someone money IF they use solar panels for a long enough time to recoup their money. The problem is that the breakeven point is so far out into the future.

The most recent report that I saw showed a breakeven point on solar panels at the 7.3-year mark. Well, many people only stay in their present homes for four to six years these days before they try to move up to another home. So a breakeven price that far out is simply not practical for anyone in that scenario.

If you're in your final retirement home and you know you've got 12+ years in that home, then it probably becomes worth doing.

But until the price of solar panels comes down more in price, it's just not a practical alternative for many people here in America just yet.

However, there is something about solar that I do like from an investment perspective and I do have a different way of playing solar that I am more comfortable with.

There is an increasing demand for solar when we look at what's happening on a broader scale. For instance, I was reading a report from Rick Rule's group and it showed that both China and Japan are pushing new programs to significantly increase their solar power capacity in the years ahead.

In fact, just last week, China's State Council backed targets to more than quadruple their country's solar generating capacity by 2015. China will add around 10 gigawatts per year from 2013 to 2015.

In addition, Japan is stepping up its solar capacity so much so that it's expected to become the world's largest solar market, even bigger than that of Germany, which is currently in first place.

They're supposed to add enough gigawatts of solar power generation this year that it would equate to five nuclear reactors!

So with Japan stepping up its solar generating capacity this year and China increasing their solar generating capacity between now and 2015, it's going to place a huge demand upon the world's supply of silver. Why?

Silver is a key component in solar panels due to its unique electrical conductive properties. China and Japan's solar projects are estimated to add up to 32.3 megawatts of power over the next three years.

Well, each megawatt requires about 2.8 million ounces of silver. So as they add this many megawatts of power, they're going to need about 91 million ounces of silver. This alone could consume up to 11 percent of the global mine supplies.

Also, once silver is used to make a solar panel, that silver cannot be recycled later on. So once it's used, it's used!

All of this could be a great catalyst that would halt silver's decline and help it to form a new uptrend.

So rather than directly investing in a solar company, I'd much rather invest a "must have" material that they'll need to build them, especially since we know that China and Japan are ramping up their use of solar panels now through 2015.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust.
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I've always liked the concept of solar energy, but it's never been a favorite of mine from an investment perspective.
Monday, 05 August 2013 07:48 AM
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