Value of top 12 solar manufacturers has dropped 91% over past 4 years

Steve Jobs's Lesson for Solar-Power Bulls

By LIAM DENNING   WSJ.COM  4/9/12

The birth of the mouse is a famous cautionary tale from Silicon Valley. In it, Xerox develops an early version of the now-ubiquitous PC pointer, but Steve Jobs and Apple actually make it ubiquitous. The warning—first movers don't always end up dominating a particular field—applies to another hot technology: solar power.

In June 2008, solar-panel manufacturers looked poised to conquer the world. The 12 largest had a combined market value of about $70 billion, according to Sanford C. Bernstein. Today, they are worth about $6.4 billion. One of them, Germany's Q-Cells, filed for bankruptcy last week. On the same day First Solar, which alone was worth more than $20 billion in 2008, saw its stock slump by almost 8%. The company is now worth less than $2 billion.

First Solar has suffered several setbacks recently, not least having to make higher warranty provisions because its solar modules may suffer "increased failure rates in hot climates" (think about that one for a second.)

The bigger issue for First Solar and peers is a structural shift in the industry. In 2008, governments, particularly in Europe, offered generous subsidies to boost solar power; carbon caps in the U.S. seemed not far off; and financing flowed easily. Equipment manufacturers were expanding quickly and driving down costs to make solar power competitive with rival sources like coal and natural gas.

One financial crisis later, public subsidies and private financing are far tighter. In the U.S., shale gas has upended the economics of electricity. Citigroup reckons that even at an installed cost of $1.50 per watt for new projects, even in the sunniest regions, solar can't compete with efficient plants burning natural gas at a cost of $5 per million British thermal units. Right now, gas costs less than half that and even utility-scale U.S. solar projects cost well north of $2 per watt.

Still, the solar-power industry has successfully cut the cost of equipment. The problem is how it has done it. All those juicy subsidies attracted competitors, particularly from China. The result is an industry that will likely end the year with the capacity to build 40 gigawatts of solar modules, according to Citi—which also estimates demand this year of just 24GW. The bank doesn't expect annual demand to hit 40GW anytime this decade.

This oversupply is driving down prices for solar panels. Bernstein puts the compound annual decline at 32% between 2007 and 2011, noting the eerie similarity with the price of computer memory, which has fallen at an annual compound rate of 33.4% since 1974.

Joshua Lott/Bloomberg News

First Solar panels being installed in Yuma County, Arizona, in February

Such falls are great for the technology concerned as it expands the available market. But the resulting commoditization, with competition focused increasingly on price, isn't great for the firms involved as the economic benefits leak away to others. Falling profit margins and share prices—as well as bankruptcies—are the unfortunate result.

Another analogy can be drawn with the U.S. exploration and production sector, which did very well to develop lots of natural-gas reserves. But the resulting oversupply has damaged the economics of the business. Value is accruing instead to those who transport and use the fuel. Increasingly, the likes of Exxon Mobil are muscling in. These bigger companies are willing and able to absorb the near-term pain of low prices in anticipation of a coming age of gas.

The bull case for solar power is that when prices drop low enough to compete without the aid of government subsidies, the resulting expansion of demand will boost the industry's fortunes.

Indeed it will. But the winners won't necessarily be the pioneers we are familiar with today. Rather, they will likely be companies with the scale to compete on price and absorb the inevitable cyclical losses that afflict most manufacturing industries prone to bouts of oversupply. A smaller group of large companies like General Electric, for example, look more like the long-term winners as solar power eventually finds its place in the sun.

Paper: Extreme weather was as common during Medieval Warming Period & Little Ice Age

A paper published in Quaternary Science Reviews finds that, contrary to AGW predictions, the frequency and severity of weather extremes was similar to the present during the Medieval Warming Period and Little Ice Age.

Quaternary Science Reviews

Volume 30, Issues 27–28, December 2011, Pages 3947–3959

Combined dendro-documentary evidence of Central European hydroclimatic springtime extremes over the last millennium

• Ulf Büntgen^a, b, , , 
• Rudolf Brázdil^c, d, 
• Karl-Uwe Heussner^e, 
• Jutta Hofmann^f, 
• Raymond Kontic^g,
• Tomáš Kyncl^h, 
• Christian Pfister^b, 
• Kateřina Chromá^c, 
• Willy Tegelⁱ

• ^a Swiss Federal Research Institute WSL, Birmensdorf, Switzerland
• ^b Oeschger Centre for Climate Change Research, Bern, Switzerland
• ^c Institute of Geography, Masaryk University, Brno, Czech Republic
• ^d Global Change Research Centre AS CR, Brno, Czech Republic
• ^e German Archaeological Institute DAI, Berlin, Germany
• ^f Jahrringlabor Hofmann, Nürtingen, Germany
• ^g Labor Dendron, Basel, Switzerland
• ^h Moravian Dendro-Labor, Brno, Czech Republic
• ⁱ Institute for Forest Growth IWW, University of Freiburg, Freiburg, Germany

• Received 5 August 2011. Accepted 6 October 2011. Available online 17 November 2011.

• http://dx.doi.org/10.1016/j.quascirev.2011.10.010, How to Cite or Link Using DOI

Abstract

A predicted rise in anthropogenic greenhouse gas emissions and associated effects on the Earth’s climate system likely imply more frequent and severe weather extremes with alternations in hydroclimatic parameters expected to be most critical for ecosystem functioning, agricultural yield, and human health. Evaluating the return period and amplitude of modern climatic extremes in light of pre-industrial natural changes is, however, limited by generally too short instrumental meteorological observations. Here we introduce and analyze 11,873 annually resolved and absolutely dated ring width measurement series from living and historical fir (Abies alba Mill.) trees sampled across France, Switzerland, Germany, and the Czech Republic, which continuously span the AD 962–2007 period. Even though a dominant climatic driver of European fir growth was not found, ring width extremes were evidently triggered by anomalous variations in Central European April–June precipitation. Wet conditions were associated with dynamic low-pressure cells, whereas continental-scale droughts coincided with persistent high-pressure between 35 and 55°N. Documentary evidence independently confirms many of the dendro signals over the past millennium, and further provides insight on causes and consequences of ambient weather conditions related to the reconstructed extremes. A fairly uniform distribution of hydroclimatic extremes throughout the Medieval Climate Anomaly, Little Ice Age and Recent Global Warming may question the common belief that frequency and severity of such events closely relates to climate mean stages. This joint dendro-documentary approach not only allows extreme climate conditions of the industrial era to be placed against the backdrop of natural variations, but also probably helps to constrain climate model simulations over exceptional long timescales.

Highlights

► 11,873 living and historical fir ring width samples were compiled across Europe. ► The world’s largest tree-ring composite continuously spans the AD 962–2007 period. ► Tree-ring extremes were triggered by April–June precipitation anomalies. ► Documentary evidence independently confirms dendro signals over the past millennium. ► Reconstructed extremes may constrain climate model simulations over long timescales.

In the Forecast: A Better Way to Measure the Temperature 

• By CARL BIALIK    WSJ.COM  4/7/12

Meteorologists aren't so hot on temperature as a way to describe the weather.

Temperature, which measures the kinetic energy of air particles, is the core figure in any weather forecast or report. But it doesn't account for lots of factors that affect how it feels when you walk outside. Wind takes away body heat, humidity prevents the body from cooling, and being in the sunlight makes the body warmer.

Averaging temperatures over a day or week or month obscures even more information, such as variation in climate throughout the day.

The Numbers Guy blog:

• Modern Thermometers

To clear the air, some meteorologists are pushing a new generation of temperature-like figures that go far beyond the reading on the thermometer or even wind-chill and heat indexes that try to account for the impact of wind or humidity.

"We don't feel air temperature," says Gerd Jendritzky, a retired meteorologist with Germany's national weather service. "What we feel is the temperature" of our body. And many factors influence that, beyond wind and humidity. Dr. Jendritzky says indexes that incorporate only one or both of these are "simple."

The quest to expand weather reporting beyond temperature numbers has been a long one. The wind-chill index used until nearly a decade ago was based in part on the rate at which plastic bottles full of water, meant to simulate the human body, lost heat in varying wind conditions. Updated tests, based on a handful of volunteers in specific conditions, found that wind doesn't increase the perception of cold to quite the extent previously thought. That was incorporated into a new formula that is used for wind-chill measurements today.

Dr. Jendritzky says meteorologists can do better. He has led a group of meteorologists world-wide in development of a new formula for what they are calling the Universal Thermal Climate Index—in the same scale as temperature, but meant to convey what it really feels like. It is based on a scientific model of 340 parts of the body—since conditions around the body affect the temperature of different parts differently, according to Dr. Jendritzky. The results will be published in a coming issue of a meteorological scientific journal, culminating what has been for him a three-decade search for a better temperature number.

Beyond the Thermometer

See mean temperatures for 66 global cities for the last year and last five years, plus other measures.

Meanwhile, if you want to look up the UTCI for your hometown, you're out of luck. Some of the data required isn't routinely collected or reported by major national meteorological services. "Hopefully, step by step people will accept that it makes sense," Dr. Jendritzky says, "and change their routine procedures."

Other meteorologists support the initiative—once they have heard about it. "These are the right kind of folks to do this," says Bruce Rose, a scientific consultant to the Weather Channel and its former principal scientist. "I would get behind it." However, an inquiry from The Wall Street Journal was the first he had heard about it.

In the meantime, Weather Channel has used a simpler measure, called "feels like," to express temperature in a temperature-like number, taking into account wind chill at low temperatures and humidity at high temperatures.

Weather Channel competitor Accuweather, meanwhile, uses an index it calls RealFeel Temperature, which it introduced in 1997. This past week, it began forecasting RealFeel along with other weather variables 25 days into the future. The company says it takes into account more than a dozen factors in computing RealFeel, but doesn't say what they are nor how it is computed.

If a temperature reading can't account for wind, humidity and even how individuals experience weather, then an average temperature for a city is even more limited. Yet it is often reported on weather sites and in travel guides.

Such averages—such as the reports that the winter was especially mild in the U.S. this past year—obscure variations during the day and throughout the time period in question. BizEE Software, a South Wales, U.K., company that develops software to help building managers assess their energy-fuel needs, publishes a measure called degree days for places around the world that highlights this variation in temperature. Degree days are the result of multiplying the time that a place is outside a comfortable range of temperature by the number of degrees it has strayed from that range.

This week, BizEE, at The Wall Street Journal's request, used the data to assess which cities' temperatures strayed outside the range of 60 degrees to 80 degrees Fahrenheit the most over the last year, and five years, through Wednesday. Temperature has its weaknesses, but is useful for indicating comfort, and the costs to maintain that comfort, while people are indoors—where humidity, sunlight and wind matter less. The results show that organizers of the 2016 summer Olympics and 2014 World Cup, both in Brazil, may have had their eyes on the weather. Rio de Janeiro and Sao Paolo ranked second and third, respectively, among 66 large global cities in staying the closest to that comfort range.

"Being a total geek, I'll look at degree days over average temperature when going on holiday," says Martin Bromley, one of two directors of BizEE.

California declares war on single family, detached homes to 'save the planet'

• WSJ.COM Updated April 6, 2012, 10:04 p.m. ET

California Declares War on Suburbia

Planners want to herd millions into densely packed urban corridors. It won't save the planet but will make traffic even worse.

By WENDELL COX

It's no secret that California's regulatory and tax climate is driving business investment to other states. California's high cost of living also is driving people away. Since 2000 more than 1.6 million people have fled, and my own research as well as that of others points to high housing prices as the principal factor.

The exodus is likely to accelerate. California has declared war on the most popular housing choice, the single family, detached home—all in the name of saving the planet.

Metropolitan area governments are adopting plans that would require most new housing to be built at 20 or more to the acre, which is at least five times the traditional quarter acre per house. State and regional planners also seek to radically restructure urban areas, forcing much of the new hyperdensity development into narrowly confined corridors.

In San Francisco and San Jose, for example, the Association of Bay Area Governments has proposed that only 3% of new housing built by 2035 would be allowed on or beyond the "urban fringe"—where current housing ends and the countryside begins. Over two-thirds of the housing for the projected two million new residents in these metro areas would be multifamily—that is, apartments and condo complexes—and concentrated along major thoroughfares such as Telegraph Avenue in the East Bay and El Camino Real on the Peninsula.

For its part, the Southern California Association of Governments wants to require more than one-half of the new housing in Los Angeles County and five other Southern California counties to be concentrated in dense, so-called transit villages, with much of it at an even higher 30 or more units per acre.

Getty Images

Condos: How California planners envision the future.

To understand how dramatic a change this would be, consider that if the planners have their way, 68% of new housing in Southern California by 2035 would be condos and apartment complexes. This contrasts with Census Bureau data showing that single-family, detached homes represented more than 80% of the increase in the region's housing stock between 2000 and 2010.

The campaign against suburbia is the result of laws passed in 2006 (the Global Warming Solutions Act) to reduce greenhouse gas emissions and in 2008 (the Sustainable Communities and Climate Protection Act) on urban planning. The latter law, as the Los Angeles Times aptly characterized it, was intended to "control suburban sprawl, build homes closer to downtown and reduce commuter driving, thus decreasing climate-changing greenhouse gas emissions." In short, to discourage automobile use.

If the planners have their way, the state's famously unaffordable housing could become even more unaffordable.

Over the past 40 years, median house prices have doubled relative to household incomes in the Golden State. Why? In 1998, Dartmouth economist William Fischel found that California's housing had been nearly as affordable as the rest of the nation until the more restrictive regulations, such as development moratoria, urban growth boundaries, and overly expensive impact fees came into effect starting in the 1970s. Other economic studies, such as by Stephen Malpezzi at the University of Wisconsin, also have documented the strong relationship between more intense land-use regulations and exorbitant house prices.

The love affair urban planners have for a future ruled by mass transit will be obscenely expensive and would not reduce traffic congestion. In San Diego, for example, an expanded bus and rail transit system is planned to receive more than half of the $48.4 billion in total highway and transit spending through 2050. Yet transit would increase its share of travel to a measly 4% from its current tiny 2%, according to data in the San Diego Association of Governments regional transportation plan. This slight increase in mass transit ridership would be swamped by higher traffic volumes.

Higher population densities in the future means greater traffic congestion, because additional households in the future will continue to use their cars for most trips. In the San Diego metropolitan area, where the average one-way work trip travel time is 28 minutes, only 14% of work and higher education locations could be reached within 30 minutes by transit in 2050. But 70% or more of such locations will continue to be accessible in 30 minutes by car.

Rather than protest the extravagance, California Attorney General Kamala D. Harris instead has sued San Diego because she thinks transit was not favored enough in the plan and thereby violates the legislative planning requirements enacted in 2006 and 2008. Her predecessor (Jerry Brown, who is now the governor) similarly sued San Bernardino County in 2007.

California's war on suburbia is unnecessary, even considering the state's lofty climate-change goals. For example, a 2007 report by McKinsey, co-sponsored by the Environmental Defense Fund and the Natural Resources Defense Council, concluded that substantial greenhouse gas emissions reductions could be achieved while "traveling the same mileage" and without denser urban housing. The report recommended cost-effective strategies such as improved vehicle economy, improving the carbon efficiency of residential and commercial buildings, upgrading coal-fired electricity plants, and converting more electricity production to natural gas.

Ali Modarres of the Edmund G. "Pat" Brown Institute of Public Affairs at California State University, Los Angeles has shown that a disproportionate share of migrating households are young. This is at least in part because it is better to raise children with backyards than on condominium balconies. A less affordable California, with less attractive housing, could disadvantage the state as much as its already destructive policies toward business.

Mr. Cox, a transportation consultant, served three terms on the Los Angeles County Transportation Commission under the late Mayor Tom Bradley.

A version of this article appeared April 7, 2012, on page A13 in some U.S. editions of The Wall Street Journal, with the headline: California Declares War on Suburbia.