Nighttime for Solar Power

Solar energy panels | BCBusiness
We like to say that the sun shines for free, but harnessing that solar energy comes at a price.

Solar power suppliers and makers around the world, including Vancouver’s Day 4 Energy, are facing some extremely dark days.

Vancouver’s Day 4 Energy – once touted as a leading alternative to resources as a basis for the “new” B.C. green economy – is among a raft of solar energy companies whose stocks have been pummelled into near submission by the financial set.

Unfortunately, those investors are right. The solar energy craze has come down a long way from its peak a few years ago when green investing was all the rage.

Was there a bubble in solar stocks? Financial Post analyst Peter Hodson thinks so. He recently wrote a column indicating that a bunch of Canadian solar energy stocks have suffered double-digit losses this year.

Day 4 Energy, for example, was down 85 per cent this year alone. The company, started by John MacDonald of MacDonald Detwiller fame, went public in late 2007 at $7.25 per share. As of yesterday the share price sat at 9 cents and MacDonald had turned over leadership of the company to George Rubin.  

Why the worldwide collapse of share prices for solar stocks? Well, fluctuating oil prices for one thing. Oil was at a record price when most of these green stocks came out, and the promise of solar power was that it might free the world from the chains of oil-based energy.

But probably the biggest reason for the collapse is the jettisoning of government subsidies for companies involved in solar power, especially in Europe. Countries like Germany, Italy and Spain were heavily subsidizing solar power as a way of “greening” their structures and weaning themselves off a dependence on nuclear and other forms of power, especially oil.

Solar power seemed like the perfect clean power – abundant and, if a little expensive, certainly corresponding to such energy sources as nuclear.  

But then along came the European financial crisis, a drop in the production of materials used in solar panels, and a lower price of oil. Suddenly, those subsidies looked outrageously expensive, and most European countries abandoned them.

That means today, even though the price of oil is predicted to rise again in 2012, solar is likely to languish for some time. It’s simply too expensive to be viable today.

This doesn’t take in the green factor, of course, but don’t look for that to save solar. We all want to be green, but when push comes to shove, our wallets generally come first. They’re looking decidedly thin over the next few years.

There are two lessons here.
1. Don’t depend on government subsidies for business success. They have a habit of changing their minds.
2. While we all like to say the sun shines for free, harnessing that power comes at a considerable price.

I have no doubt that solar will be the mainstay of the world’s power supply sometime in the future. Just not right now.