Electric Cars and the Lithium Battery Market

Monday, Apr. 05, 2010
Why Start-Ups Are Charging Into Lithium
By Steven Gray / Detroit

In February, President Barack Obama told the crowd at a Henderson, Nev., high school that not so long ago, the U.S. made barely 2% of the advanced batteries used in the world's electric vehicles. Now, thanks to a multibillion-dollar federal investment, American companies are positioned to increase production tenfold — and potentially control 40% of the global lithium-ion-battery market by 2015. "We've created an entire new industry," Obama said.

Not quite, but certainly the beginnings of one. Demand for lithium-ion batteries is increasing dramatically as electric-car technology improves and prices drop. Nissan has introduced the all-electric Leaf, and this year Chevy will debut the long-anticipated gas-electric Volt. Those and future electric cars need battery packs, and at least a dozen American lithium-battery start-ups are competing with Asian companies such as Sanyo and Hitachi to provide them. "There's a tremendous amount of competition," says David Vieau, chief executive of A123 Systems, a Watertown, Mass., start-up powered by federal money that is vying for the business. (See the history of the electric car.)

And it's a ton of business. The consulting firm Pike Research estimates that the global market for lithium-ion batteries could grow from $877 million this year to $8 billion by 2015. In North America, the market is expected to expand from about $287 million this year to $2.2 billion in 2015.

A123 Systems is a window on how the government's multibillion-dollar electric-vehicle gambit is working. The company was founded at MIT in 2001 with a $100,000 Department of Energy grant. One of its early products was lithium-ion batteries for power-tool maker Black & Decker. Last year, A123 Systems got a $249 million federal grant to open at least three lithium-ion-battery plants in Michigan that will employ hundreds of workers. Michigan is home to or close to many of the plants where electric vehicles are being made, of course, and the state has a surplus of skilled workers. It's not, ahem, a bad choice politically either.

Vieau attributes his company's recent success in part to its deep finances and manufacturing capacity. Customers regularly ask, he says, "Do you have the financial wherewithal to keep up and execute at a large scale?" Companies like A123 are busy wrestling with two key issues facing electric-car batteries: providing enough power to the car's engine and storing enough power to guarantee a defined range — say, 200 miles (about 320 km) — between charges. The goal for electric-car manufacturers is an affordable battery that can handle countless partial charge-discharge cycles over an eight-to-10-year life cycle. The battery has to absorb energy from braking and provide short bursts of power for acceleration. Lithium-ion batteries, with their high density-to-weight ratio, provide the greatest acceleration and range with the fewest batteries compared with lead-acid or nickel-metal-hydride batteries. One big problem: they can overheat and even blow up — bad enough in a single-battery laptop but potentially disastrous in a multibattery electric car. So engineers have been busy resolving the heat problem and refining the batteries' ability to handle partial charge-discharge cycles.

As for affordability, lithium-ion battery packs currently cost about $1,000 per kilowatt-hour of capacity. Which means the GM Volt's 16-kW-h battery pack alone would cost $16,000, according to some industry analysts. The price per kilowatt-hour has to fall below $500 to make production viable — and it will.

Sakti3 is another company trying to create a breakthrough. The company was launched a few years ago at the University of Michigan by an ambitious young engineering professor, Ann Marie Sastry. Sakti3 is developing solid-state (as opposed to liquid) lithium-ion batteries that Sastry believes will enable cars to travel twice as far as batteries do now, allowing the cars to be used the way internal-combustion-engine-driven vehicles are. Her firm is developing prototypes to deliver to automakers later this year. Sastry's 20-employee firm, based in Ann Arbor, has generated millions of dollars in government grants and considerable buzz — but so far no juice.

Automakers, meanwhile, are developing their own battery capability. Ford, for one, believes that designing its own lithium-ion battery packs will help streamline the development of its electric vehicles and reduce the cost. Design experts will be brought in-house, says Nancy Gioia, Ford's director of global electrification. By developing battery packs, Gioia says, "we get the volume and scale of more than 1 million units on our battery-management systems. Our suppliers aren't in a position to do that yet."

While they wait for the U.S. electric-auto market to develop, some new suppliers are looking toward consumer electronic goods and markets outside the U.S. to keep their plants busy and improve quality until the big orders come in. "We're in the early stages of what will be a significant run-up," says A123's Vieau. "There's a lot of business out there." Sastry echoes that view, saying many automakers rely on engine suppliers. "If the dream I and others have is realized, we'll see batteries being treated like engines," she says. Job engines, no less.




Click to Print Find this article at:
http://www.time.com/time/magazine/article/0,9171,1975337,00.html

Clean Energy: LED lighting market growth (WSJ)

LED Growth Is Making Sapphire Supplies Look Precious

By Sari Krieger
Of DOW JONES CLEAN TECHNOLOGY INSIGHT
NEW YORK (Dow Jones)--The light-emitting diode market is heating up and expected to boom in coming years, but there is already a supply chain bottleneck in the material on which the LEDs are grown - known as a sapphire substrate - which could hinder LED industry growth.

Manufacturers of the substrates, which are synthetic versions of the precious stones, haven't been able to produce enough to keep up with the recently rising LED demand, causing sapphire prices to spike. While this shortage may slow adoption some, or may hurt LED makers, it could benefit the few suppliers that do make this material, which include Rubicon Technology Inc. (RBCN), Monocrystal PLC, Kyocera Corp. (6971.TO, KYO) and Namiki Precision Jewel Co.

Jed Dorsheimer, an analyst with Canaccord Adams Inc., warns that the shortage issue is "severe." He said that in order to meet demand, current sapphire capacity has to grow by two to three times, depending on how much the LED market expands.

When the economy started to revive last year, demand for LEDs grew quickly for use in backlighting, such as for televisions, as well as for general lighting applications. According to the Department of Energy, LEDs are 10 times more energy efficient than incandescent lights and companies are starting to take advantage of these savings. The DOE predicts that LEDs will make up 70% of the lighting market by 2020, up from less than 1% currently.
Similarly, The Freedonia Group Inc., a Cleveland-based research firm, forecasts that U.S. demand for advanced lighting products such as LEDs, compact fluorescent lamps and sodium vapor HID lamps will grow 11% per year to $6.8 billion in 2013.

Dorsheimer said rising demand already has boosted sapphire prices by 50% in the past seven months, but he doesn't expect new capacity to come online until 2011.

He said the industry average price for a two-inch sapphire wafer went from $18 in 2007 to $10 in June 2009 to $15 now. A four-inch wafer, which has been less widely produced, has held steady at $80 to $90, he said.

Bill Weissman, chief financial officer of Franklin Park, Ill.-based Rubicon, said his company saw a 7% rise in the price of its sapphire in the last quarter of 2009 and predicts another 15% rise this year. But Weissman said that the sapphire is only 8% of the material for the LED chip, so it shouldn't affect the price of the final LED too much.

Expanding sapphire production to meet the rising demand can't be done quickly, according to Tom Griffiths, president and publisher of LED industry publication Solid State Lighting Design News.

"Sapphire production is capital-equipment driven, and both investment and credit funding is still being approached cautiously, so getting the money to expand isn't as easy as it may have been in past years," he said.

"Tightened supply will increase the sapphire costs and somewhat dampen the industry growth," Griffiths said. "That will be relatively short lived, as increased profits will make capital equipment expansion easier for existing suppliers, as well as enable new entrants to show a convincing business plan to get funding for equipment."

Companies grow sapphire by heating aluminum oxide to 3,800 degrees Fahrenheit. Then LED manufacturers buy the sapphire wafers and load them into machines that lay on top of the sapphire wafer chemical layers of gallium nitrite, which is the light-emitting material. Compared with natural sapphires, the manufactured versions don't have impurities and are therefore clear.

Dorsheimer said that because companies were hesitant to expand production, waiting to see whether the increase in demand would remain, it will take a year or two for sapphire-makers to catch up with demand. Also, he said that LED-makers are asking for larger sapphire wafers, up from the traditional two-inch wafers, making production more difficult.

"New entrants are starting on four-inch and six-inch [wafers]," Dorsheimer said. "This reduces the number of sapphire suppliers as the specifications change when going to larger wafers - quality becomes more important."

Weissman said his company has ordered more machines to expand capacity. The company is building two new plants, one in Malaysia and one in Batavia, Ill., but they won't be ready until later in the year. Until Rubicon and other sapphire makers can expand, the world's sapphire supplies are tapped, Weissman said.

As well as the benefits of higher prices flowing to sapphire makers, Griffiths said Durham, N.C.-based LED-maker Cree Inc. (CREE) could gain a competitive advantage from the sapphire shortage because it uses silicon carbide as a substrate to grow LEDs.
"[Cree] can therefore presumably keep their cost-saving ramp moving unhindered," Griffiths said. "Eventually every LED manufacturer benefits as there will surely be a period of excess sapphire supply that will tank those substrate prices, at least temporarily while supplies adjust and consolidation occurs."

(Dow Jones Clean Technology Insight covers news about public and private clean-technology and alternative-energy companies.)

-By Sari Krieger, Dow Jones Clean Technology Insight; 212-416-2016; sari.krieger@dowjones.com

Growing Market for LEDs (WSJ, Japan Times)

NOVEMBER 5, 2009, 4:12 P.M. ET
Cree To Light Up 650 Wal-Mart Stores' Aisles With LEDs

By Sari Krieger
Of DOW JONES CLEAN TECHNOLOGY INSIGHT
NEW YORK (Dow Jones)--Attention Wal-Mart shoppers: Cree Inc. light-emitting diodes will soon be lighting up the retail giant's stores in various aisles.

Durham, N.C.-based Cree said Wednesday that Wal-Mart Stores Inc. (WMT) signed a deal with the company to buy two kinds of its LED lights, which the retailer will install in 650 of its stores in the first year. Although the companies wouldn't disclose the value of this deal for Cree, or exactly how many lights Wal-Mart bought, this move has larger implications for the LED lighting industry and Cree.

"I think it's an important milestone in what we've been calling the LED lighting revolution," said Cree Chief Executive Chuck Swoboda in an interview with Clean Technology Insight. "It demonstrates that LED lighting really works in commercial lighting applications."

Swoboda called this deal an "initial roll out," but he wouldn't say whether Wal-Mart has expressed interest in buying more LED lights, otherwise known as solid-state lighting.

Wal-Mart didn't return a call requesting comment.

The adoption of LED technology, and Cree's products specifically, by the retail giant could soon bring other retailers knocking at their door. Swoboda said that once some municipalities started using outdoor LED lighting, others soon followed suit. The retail arena should be similar, Swoboda said he hopes, because he thinks that once some companies try LED lights and can show some positive results, others will be less gun-shy about switching to the technology.

Wal-Mart bought Cree's LRP-38s, a spot light, to illuminate some of its products. This light lasts 50,000 hours, consumes 82% less energy than the 70-watt ceramic metal-halide bulbs it replaces and can last more than five years when kept on all the time. These lights also make products displayed under them look more vivid and they don't radiate heat down, helping delay product spoilage, as the company demonstrated at the Lightfair International Convention in May, held in New York. Cree rolled out the LRP-38 at the convention.

The deal also includes use of Cree's LR6 recessed can lights in some Wal-Mart new construction, but the companies wouldn't give further details on how many or where they will be used. The LR6 has similar specifications to the LRP-38, but it is a more general-purpose light, rather than a spot light.

Theo O'Neill, an analyst with Kaufman Bros. LP, said in an interview that this initial roll out brings Cree about $4 million to $8 million in revenue.

"It's obviously a plus for Cree," O'Neill said. "Plus it will help with industrial expansion of this business. There are five billion light bulbs in the U.S. and they are all going to convert to solid-state lights eventually. Big, big business."

O'Neill has a "hold" rating on the stock and a $36, 12-month price target. He doesn't own shares of the company and Kaufman Bros. makes a market in shares of Cree.

Jed Dorsheimer, an analyst with Canaccord Adams Inc., who has been consistently bearish on Cree's stock, acknowledged the significance of the deal. He doesn't own shares of Cree and Canaccord Adams conducts no business for Cree. He has a $45 price target and a "hold" rating on shares of Cree.

"It's also great to see Wal-Mart transition to solid-state lighting, as they did with refrigeration," Dorsheimer said. "Typically, they lead the market by one to two years."

Bentonville, Ark.-based Wal-Mart has already installed LED lights in its refrigerator and freezer cases and is considering using LED parking lot lights, it said recently.

Shares of Cree climbed Wednesday $1.92, or 4.5%, to $44.70 on Nasdaq. Shares of Wal-Mart increased 89 cents, or 1%, to $51.27 on the New York Stock Exchange.

(Dow Jones Clean Technology Insight covers news about public and private clean-technology and alternative-energy companies.)

-By Sari Krieger, Dow Jones Clean Technology Insight; 212-416-2016; sari.krieger@dowjones.com



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BUSINESS SEPTEMBER 30, 2009
Lighting Firm to Unveil LED Bulb
By SARI KRIEGER

Lemnis Lighting Inc. plans to announce this week the full-scale release in the U.S. market of a light-emitting diode bulb, its entry in the race to replace 60-watt incandescent lights.

As consumers look to cut down on energy use and the federal government's 2012 ban on incandescent bulbs approaches, sales of compact fluorescent lights have increased. These spiral-shaped lights use much less energy than traditional incandescent lights, which waste most of the energy they draw. CFLs also last seven to 10 times longer than incandescents.

But light-emitting diodes, or LEDs, promise a next generation of lights that are even more efficient, last longer, are more easily dimmable and, unlike CFLs, don't contain mercury.
Lemnis Lighting says its Pharox light looks like a traditional incandescent light, with a metal piece wrapped around the midsection of the light that acts as a heat-sink, keeping the LEDs cool and ensuring a long life of 35,000 hours, or about 20 years of normal household use. The bulbs are pricey, though, costing about $40 each.

Its light output looks like what consumers expect from a soft white incandescent light, as opposed to the harsher, blue-hue from a cool white often seen from fluorescents in offices and hospitals.

The LED light draws 6 watts and puts out the same amount of light as a 40-watt bulb if used right-side-up, such as in a desk lamp, or the equivalent of a 60-watt bulb if used in an upside-down application, due to the nature of LEDs.

Lemnis Lighting is owned by Tendris Holding, a business incubator and operator in sustainable technology and services based in Naarden, Netherlands. Both Lemnis and Tendris are run by Warner Philips, the grandson of Royal Philips NV co-founder Anton Philips. Tendris was formed in 2002 with investments from its insiders and friends and family. Philips is a 10% shareholder in Tendris.

Mr. Philips said in an interview that Lemnis is in talks with major U.S. retailers to sell the Pharox product.

Coming up with a quality, affordable 60-watt replacement light has been a challenge for the LED industry, partially for the reason that LEDs are by nature directional sources of light, as opposed to traditional incandescents that shine in 360 degrees. Top LED companies have been concentrating mostly on directional light sources for commercial and industrial purposes, which make up the bulk of the lighting market.

But the Department of Energy recently established the Bright Tomorrow Lighting Prize, known as the L-prize, which is a competition for companies to come up with the best 60-watt replacement light. The DOE said last week that more than 425 million 60-watt incandescent light bulbs are sold each year in the U.S. alone, representing approximately 50% of the incandescent light bulb market.
So far Amsterdam, Netherlands-based Philips is the only company to submit a product.

The DOE said an LED replacement for this purpose could save 34 terawatt-hours of electricity in one year, enough to power the lights of 17.4 million U.S. households and avoid 5.6 million metric tons of carbon emissions annually.

New York-based Lighting Science Group Corp. has a 40-watt incandescent LED replacement that the company says draws about 7 watts, lasts 40,000 hours and is dimmable.

Thomas Griffiths, an LED industry expert, said in an interview that he sees these three companies as the main competitors at the moment on the LED replacement light scene. Griffiths said the Pharox light looks like a good product, but only time will tell for sure, and he thinks the $39 sticker price is still too high.

Lemnis offers a three-year warranty on the product and the company estimates that an average utility rate of 15 cents per kilowatt-hour, a consumer will achieve a payback within three years.

"I think they're representing where the state of the technology affordably has us right now, but there's still a ways to go before there's a real replacement, and right now Philips is the one to watch because of this announcement," Mr. Griffiths said.

Philips said in a statement that it is confident its product meets the criteria of the L-prize, which calls for a higher level of efficiency, better quality light and more light output than the Lemnis and Lighting Science products.

Although Philips and Lemnis are competitors in this context, Philips acquired an equity stake in Tendris in January.

Mr. Philips said that if Lemnis, with the help of Los Angeles-based partner Digital Light LLC, can reach its goal of selling 10 million lights world-wide within the next 24 months, the price could drop to $30 per bulb.

Griffiths said LED replacement lights need to reach the $15 to $20 range before they'll really be viable.

Tendris' first investment was Oxxio, a supplier of renewable energy, which was sold to Centrica PLC in 2005. That exit gave Tendris at least $39 million more to play around with. The same year, the Dutch National Postcode Lottery also bought a 10% stake in Tendris, giving the company more capital to push its innovations out into the market.

Lemnis, based in Hertogenbosch, Netherlands, was founded in 2005 and is on the verge of profitability, Mr. Philips said in an earlier interview.

Mr. Philips said he isn't looking for an exit with Lemnis, but he said long-term partnerships are always a possibility.

Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved


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LED light bulbs fly off shelves as price war starts


By YOSUKE FUKUOKA
Kyodo News
Light-emitting diode lights are selling like hot cakes since prices dropped by half this year.

The surge in demand for the new generation of light bulbs has quickly emptied store shelves, prompting more manufacturers to jump into the market.

LED lights first appeared about a decade ago, but their poor brightness limited them to emergency use. Recent advances in longevity and brightness, however, have turned their fortunes around completely.

Today's LED bulbs cost as little as ¥4,000 but boast a longevity of 40,000 hours, which is about 40 times the life span of incandescent bulbs. They also consume nearly 90 percent less electricity than incandescent bulbs.Compared with fluorescent light bulbs, LED lamps are six times more durable and use at least 40 percent less energy.

Rising public awareness of environmental issues is also boosting LED sales. Countries embarking on "green" initiatives are letting incandescent bulbs fall by the wayside as they move to save energy.

Under the previous government led by the Liberal Democratic Party, then Economy, Trade and Industry Minister Akira Amari announced a plan last year to cease production and sales of incandescent bulbs by 2012.

As a result, demand for LED bulbs is outpacing supply.

"We are swamped by orders and just can't keep pace with demand," said Takahisa Uzumaki, senior manager at Toshiba Lighting & Technology Corp., a unit of Toshiba Corp., which developed LED bulbs in 2007.

Sales of LED lights spiked this summer as prices began to come down. At one large store in Tokyo's Akihabara electronics shopping district, "Sold Out" signs were seen at the LED light section.

"Many customers buy LED bulbs just to try them out," said a shop clerk.

In June, Sharp Corp. unveiled a plan to sell LED bulbs for about ¥4,000, less than half the price of products made by other companies. Then more manufacturers, including Panasonic Corp. and NEC Corp., entered the fray.

Competition is heating up because startups founded only five or six years ago have entered the market, since it doesn't take large facilities to mass-produce LED bulbs. That's one of biggest differences of LEDs over incandescent and fluorescent lamps.

As new companies crowd into the LED business, Toshiba Lighting is taking on the challenge by halving its prices. Their bulbs now retail for under ¥5,000.

The Toshiba group is fostering the business and betting it will turn into a hot sector.

"We intend to boost annual LED lighting sales to ¥350 billion by March 2016 from the current ¥20 billion," said Masashi Muromachi, a senior executive at the parent firm.

Sharp aspires to raise annual sales to ¥50 billion in the near future.

With energy conservation a matter of global concern, manufacturers also anticipate brisk demand abroad. Toshiba aims to get overseas sales to account for 30 percent or more of its total LED sales by the year ending in March 2016.

Panasonic is also setting its eyes on foreign markets.

While they are experiencing a sudden burst of popularity, LED bulbs still leave something to be desired technologically. They are more expensive and less bright than their fluorescent counterparts.

The new type of light bulb can become standard in every household only when manufacturers address and overcome these weaknesses.

The Japan Times: Friday, Oct. 23, 2009
(C) All rights reserved

Renewable Energy, Clean Technology: Water, Solar, Hydrothermal , Wind, Biofuel Companies (Businessweek)

Renewable Energy
May 06

By Aaron Pressman

Clean energy may be the wave of the future, but shares of alternative energy suppliers have taken investors on a wild ride. After getting hit hard by the credit crunch last year, the sector has rallied recently as stimulus plans from the Obama Administration and other governments promise substantial sums for renewable energy projects. The Market Vectors Global Alternative Energy ETF, which tracks 30 companies around the world, lost 61% last year but has risen 22% over the past three months.


Much of the money will likely go to the industry’s biggest and best-known companies, like Denmark’s wind farm developer Vestas Wind Systems or solar-panel maker First Solar of Tempe, Ariz. There will also be opportunities for smaller players. But “this can be a hairy sector for investing in early-stage companies,” says Edward Guinness, co-manager of the Guinness Atkinson Alternative Energy Fund.

While solar and wind projects are now commonplace, geothermal power is less developed. Geothermal systems typically use heat found deep underground to make steam and generate electricity. WaterFurnace Renewable Energy in Fort Wayne, Ind., builds heat pump systems that don’t require deep drilling for homes and businesses. The technology takes advantage of modest but consistent temperatures of about 55 degrees found a few feet underground. Air pumped underground is heated or cooled, which reduces the load on traditional heating and cooling systems and cuts energy bills by about two-thirds. Over time, that offsets installation costs. Revenue is growing 50% a year, and installations haven’t been hurt by the credit crunch, says Jack Robinson, lead manager of the Winslow Green Growth Fund. Guinness’ fund owns Energy Development Corp., a Philippine utility that oversees a dozen geothermal plants and consults on projects for others.

Stocks in the biofuels area have been crushed, not just by difficulty obtaining financing but by overbuilding and rising prices for key ingredients. It isn’t clear which players will survive. Still, the sector could one day generate big profits so it pays to stay up to date, says Guinness. He thinks Maple Energy, a Peruvian oil and gas producer, could become a leading ethanol supplier. Even so, Guinness sold the stock last year after a runup. “When they get their plant up and running, they’ll be the world’s lowest-cost ethanol producer,” he predicts. But he’s waiting to see how the project progresses.

President Barack Obama’s plan to reduce air pollution with a system of tradable pollution rights, known as “cap and trade,” could lead to the development of trading exchanges rivaling those for stocks, bonds, and derivatives. U.K.-based Climate Exchange, a publicly traded company, is the leading player in European pollution-rights trading, but Guinness says it’s too pricey at more than five times expected 2009 revenue (it has yet to show a profit). Unless a national cap-and-trade system becomes a reality in the U.S., the stock is too speculative, he says.

Another player, World Energy Solutions of Worcester, Mass., trails Climate Exchange in revenue. But new Environmental Protection Agency chief Lisa Jackson is familiar with the type of system World Energy has developed, which could bode well for the technology, says Winslow’s Robinson. “They’re a small player but are just becoming profitable and growing at a 50% rate,” Robinson says. Investing in it now, he adds, is like being a venture capitalist

Stimulus Package Opportunities (from Bondbuyer.com)

"Stimulus 2009 - Maximizing the Opportunity" March 26, 2009 reprint from bondbuyer.com on
Resources for Information on the American Recovery and Reinvestment Act, including
new bonds to fund infrastructure, clean energy, clean water initiatives for municipalities.

Solar Cell Companies (from Fortune Magazine)

Solar stocks for a rainy day
The industry has taken a beating in the market lately, but a few standouts may shine in the long run.

By Michael V. Copeland, senior writer
November 4, 2008: 5:14 AM ET

Find this article at:
http://money.cnn.com/2008/11/03/technology/copeland_solar.fortune/index.htm




(Fortune Magazine) -- No one loves Arnold Schwarzenegger more than the solar industry. Kicking off the nation's largest gathering devoted to all things sunny, the California governor won thunderous applause and two standing ovations from the crowd of 20,000 at the San Diego Convention Center. "What's green for the environment can also be green for the economy," he said. "Solar is the future; it's now; it can't be stopped."

For those four days in October, the Solar Power International 2008 convention drew attendees from 70 countries and generated lines stretching out the door for parking, food, and just about everything else. It seemed as if the power of the sun could conquer all. You wouldn't have guessed that just a week before, the financial meltdown had felled sector after sector, including the once-shining solar industry.

It's not that this swelling crowd thinks the macroeconomic troubles the world faces won't affect the solar industry; they know they will. All the leading solar companies have already seen the value of their stocks plummet far more than the 36% the Nasdaq has dropped from the beginning of the year to Oct. 21. The value of the Claymore/MAC global solar energy index (TAN), an ETF comprising global solar stocks, has dropped 56% since it started trading in mid-April.

Given the uncertainty of the economy, some analysts fear that the solar industry's customers could have trouble financing utility-scale solar projects that use lots of modules. Most residential solar installations, which can cost $20,000 to $30,000, require homeowners to borrow, and that money has all but disappeared. Subsidies in Spain, a huge market in recent years, are decreasing, and it is an open question whether countries that have new subsidies coming online, like Italy, Greece, and France, will fill the void.

In contrast to the 1980s - when solar companies got swept away by cheap oil, withdrawn government subsidies, or steep economic downturns - the sense this time is that the industry is here to stay. And not just stay and survive, but stay and flourish. Concern over climate change, combined with falling prices for solar technology, has made this source of carbon-free electricity more attractive than ever. The worldwide market for solar energy roughly doubled last year, to $33 billion, and analysts expect revenues to grow 33% a year for the foreseeable future. What began as a technology championed by tree huggers and pot growers is now a global market that Lux Research, based in New York City, says will reach about $100 billion in sales within the next five years. Germany, Japan, and Spain rank as the top markets for solar power, but other Western European nations are coming on fast, as are China and the U.S. As part of the bailout package, Congress extended the 30% investment tax credits for clean energy, which should give a boost to the American market.

'A real industry'
"Solar has become a real industry," says Marc Porat, a Silicon Valley veteran and chairman of green-building-materials company Serious Materials. Porat was at the conference in San Diego scouting for solar-electricity generating systems for another green project of his. Looking around the hall packed with startups selling everything from tools for manufacturing solar cells to rooftop hardware for mounting equipment to software for analyzing power needs, Porat emphasizes his point. "You can see that all the gaps in the market have been filled by multiple companies," he says. "It's the same with any good entrepreneurial opportunity."

After 30-plus years of steady improvement, solar electric technology is going mainstream. Photovoltaic (PV) panels, which convert sunlight directly into electricity, can increasingly be found on residential rooftops, warehouses, and Wal-Marts. Large-scale photovoltaic solar farms cover huge swaths of land to supply utilities with clean power. Entrepreneurs have also invested in solar thermal farms, where the sun's heat turns liquid into steam to drive a turbine.

Even with state-of-the-art manufacturing methods, PV solar power is still on average twice as expensive to produce as electricity generated by a coal-fired plant. But prices are finally coming down even as efficiency goes up, and some experts think the cost of solar will rival grid power in the next two to three years. In the meantime, government subsidies are bridging the cost gap in many markets. Also, as more nations pass carbon cap-and-trade laws - in the U.S. both Senators McCain and Obama support the idea - natural gas and coal will become more expensive, which should close the gap further. Finally, the industry has achieved scale. These are not backyard enterprises - they pull in hundreds of millions in revenue annually and do business everywhere on the planet. That they all are pursuing economies of scale should help drive down the cost of solar even further.

Although the industry is able to sell solar cells and modules today as fast as it can make them, analysts predict capacity will almost double in 2009. That has caused some analysts to raise the specter of over-supply and the possibility of a bloody price war among manufacturers. "It's going to trigger a shakeout," says Ted Sullivan, a senior analyst with Lux. "The weakest players will either get acquired or fail."

While industry players mostly disagree with Sullivan on the inevitability of aggressive price wars, they do see an upcoming shift in the industry. "I think we all agree that markets tend to consolidate during times like these," says Tom Werner, CEO of SunPower, a maker of solar-power-generating systems. "This is one of those periods in an industry where a handful of big players emerge."

Of the 14 pure-play public solar companies, experts expect at least three to stand out from the crowd. The winners possess differentiated technology, enough cash to survive, and the financial heft to enter the entire solar food chain, from producing modules to selling power like any other utility. While the industry is likely to remain volatile for some time to come, long-term investors might want to consider stocks of these three companies, whose values now look attractive.

First Solar
Among the favorites of stock analysts is First Solar (FSLR). Founded in 1999 and originally backed by the investing arm of the Walton (Wal-Mart) family, First Solar went public in 2006, right at the beginning of a wave of solar IPOs. In the coming shakeout First Solar should thrive, because with its cutting-edge thin-film technology it is able to produce solar modules more cheaply per watt than its competitors. Traditional crystalline-silicon photovoltaic systems sandwich wafers of silicon between glass, resulting in those boxy panels you see on rooftops. By contrast, First Solar's thin-film technology applies a fine layer of material directly to a glass substrate. The process is faster, and because it requires just a fraction of the expensive silicon used in traditional PVs, it's vastly cheaper. First Solar, which operates factories in Ohio, Malaysia, and Germany, can produce systems for $1.14 per watt of power, compared with $2.90 per watt for traditional crystalline-silicon solar cells. With subsidies, First Solar's products can compete in many parts of the world with a natural gas or coal-fired power plant.

Run by managers who are fanatics about meeting goals and avoiding unnecessary costs, First Solar routinely blows away both its own and the Street's targets. Its manufacturing team is legendary, bringing online factories that exceed expectations. "They come in at over 100% of projected capacity," says Jenny Chase, a senior analyst with New Energy Finance. "No one else does that."

The shares of this highflying Tempe, Ariz., company peaked at $317 in May and now are trading at $144. Analysts expect sales this year to reach $1.2 billion, up 138% from 2007, and to top $2.1 billion next year, with earnings per share more than doubling. First Solar also sits on $633 million in cash. While the stock is pricey with a current P/E of 50 and a forward P/E of 21, the company's growth prospects and strong balance sheet make it look like a buy.

SunPower
While First Solar has laid claim to the lowest price per watt for its modules, SunPower (SPWRA) claims the most efficient. Inch for inch, its modules produce the most electricity. While SunPower's systems are expensive, you need fewer of them, which makes them perfect for homes and businesses where space is tight. The company, based in San Jose, was spun out of Cypress Semiconductor in 2005 and now sports a $4.2 billion market cap - about eight times the size of its former parent. It has carved out a place in the solar industry similar to Apple's in the computer world, producing well-designed, aesthetically pleasing modules. SunPower has distinguished itself in the market as one of the highest-quality makers of modules. "Brand actually does matter in this industry," New Energy's Chase says, "and SunPower has it."

Besides making and installing systems, SunPower has started on a new track. Much like a utility, it has decided to sell the power its modules produce directly to customers. But that new strategy hasn't kept the stock from getting hammered. Over the past year, SunPower stock fell from a 52-week high of $164 to a low of $37 in early October. Werner is shocked by the drubbing his stock has taken. "The markets are valuing growth companies as if they were lead-pencil companies," he says. "This will take care of itself in time, and we are obviously in a really, really unique time."

Now trading at around $54, with a current P/E of 60 and a forward P/E of 12, this stock, too, looks like a buy. Analysts expect SunPower's sales this year to hit $1.4 billion, up 80% from 2007, and to rise to $2 billion in 2009. Earnings per share are expected to rise from $2.33 in 2008 to $3.55 in 2009, a 52% increase.

Suntech Power
While SunPower is obsessed with quality, what solarmaker Suntech Power (STP) offers is scale. Based in Wuxi, China, the company is the world's largest manufacturer of solar PV modules and has set in place an aggressive plan to stay on top, says Roger Efird, who runs Suntech's business in the Americas. With a cash hoard of $752 million, access to cheap local labor, and deep-pocketed Chinese lenders backing it up, the company has been able to take advantage of the fast-growing market. Efird, who is also chairman of the U.S. Solar Energy Industry Association, believes the risk of price declines in solar modules next year will be offset by continued thirst for new sources of clean energy in both China and the U.S.

Wedged in by people filling Suntech's booth at the San Diego solar conference, Efird looks around the hall. "There's not a person in this room who has a module for sale between now and the end of the year. It's all sold out," he says. "What people forget is that there are hundreds upon hundreds of solar projects, in the U.S. in particular, sitting on the shelf waiting for the right economic moment." Efird believes that moment is coming next year.

To hedge its bets, Suntech, like its competitor SunPower, is moving up the food chain, selling power directly to commercial customers. That's not Suntech's only hedge. The company has invested tens of millions to lock in the price of silicon over the next five to ten years, betting that demand will rise and prices eventually will trend up. Competing manufacturers without Suntech's resources will have to face the vagaries of the spot market for silicon in years to come. Of course, if silicon prices drop - new capacity is coming onstream - the move could prove a costly mistake for Suntech.

Suntech's share price has fallen from a 52-week high of $90 in January to $18 in mid-October. It looks cheap, with a current P/E of 17 and a forward P/E of 9. This year's sales, stemming mostly from its business in Asia, are estimated to clock in at $2.1 billion, up 62% over 2007, rising to $3.2 billion in 2009, as it pushes hard in the U.S. Earnings per share are projected to go from $1.67 this year to $2.50 next.

The shares of even the best solar companies have fallen on hard times. Yet for anyone who believes that the world is destined to move away from a carbon-based economy, investing in this nascent industry, at least in the long term, may very well be a move you won't regret.