House Mountain Partners

TAN

Disruption Is On its Way To Solar Panel Manufacturing: A Case Study of Aurora Control Technologies (ACU:TSXV, AACTF:OTCBB)

Chris Berry

By Chris Berry

 

Introduction

After a recent slump, solar power has shown tremendous growth. Global photovoltaic (PV) capacity is 139 Gigawatts (GW) as of the end of 2013 and another 44.5 GW is forecast to be added in 2014. One GW is enough electricity to power between 750,000 and 1,000,000 US homes. The 44.5 GW mentioned above is almost a 21% increase y-o-y and equals the output of 10 nuclear reactors, according to Bloomberg. 

Overcapacity has resulted from government subsidies and has served to push panel prices down, helping to make solar more cost competitive with other fossil-fuel based sources of electricity. Dozens of panel makers still exist which implies further consolidation in the industry despite the projections mentioned above.

We are focused on finding value along supply chains across an entire industry and to that end the solar panel manufacturing business offers an interesting case study in finding value in a global “low growth” or “slow growth” environment. One of the key questions for market participants is “how will a panel manufacturer compete and thrive in a hyper competitive industry despite the rosy growth prospects?” Price declines and competition will hurt margins which in turn have the potential to impact investment returns.

The key is solar cell efficiency. 

Case Study of a Growth Driver - Silver Use in Solar

Chris Berry

By Chris Berry

 

Since the beginning of the commodity downturn in 2011-2012, I have been vocal on the need to analyze each metal or mineral individually as they aren’t all created equal. You run the risk of throwing out the “baby with the bath water” and missing investment opportunities.

The same argument holds true when you look at individual demand components for a given metal or mineral. With that in mind, recent research I’ve done on the solar photovoltaic (PV) manufacturing industry has shed light on some astounding growth rates for one metal in particular: silver.

Solar Backgrounder

I don’t intend to enter into the debate about the economics of renewable energy here, but do believe that solar power is going to continue to become more and more mainstream as costs along the entire value chain continue to plummet. A good primer on how PVs work can be found here.