New Light on Solar Energy

The market isn't mature yet, but it's rapidly picking up speed thanks to rising environmental consciousness and innovative initiatives

by Cassidy Flanagan

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Kermit the Frog once exclaimed, "it's not easy being green," but today being green is the fast track to raising both profits and environmental consciousness. Take the rapidly expanding solar-energy market, which has picked up momentum in the past few years and which was the topic of a RBC Financial Group report, "Investing in Solar Now," released on May 9.

The report from the New York City-based group provides a useful snapshot of the current state of the solar-energy industry and its potential for investors. According to the report, the demand for photovoltaic solar power will grow about 40% by 2011, making it an attractive market for venture capital and private investment.

"[Solar energy] isn't mature yet, so a lot of money is going into research and development. About $1.7 billion was invested as private equity and venture capital in the solar industry in 2006—mostly private equity for factories in China and investment in technology companies in the U.S. and Germany," explains Jenny Chase, a senior solar analyst for London-based investor research and information firm New Energy Finance. "In addition, $4.5 billion was invested in publicly quoted solar companies in 2006, most of which is being spent on expanding global manufacturing capacity," she adds.

Solar energy's recent boom is due in part to growing public and governmental awareness of the developing technology, which was introduced as an energy option during the oil crisis of the 1970s. In 1999, German legislation—known as the "100,000 Roofs" law, due to its aim to cover 100,000 roofs with panels—followed by the Renewable Energy Law in 2000, provided low-interest loans for home and business owners to install solar-power panels. It also gave installers the opportunity to earn half a euro for every kilowatt of electricity they generated in the power grid.

Silicon Panels Still Rule

In the U.S., the Energy Policy Act of 2005 currently provides a 30% tax credit on all solar systems installed by private homeowners and businesses. This policy is set to expire at the end of this year, though newly proposed legislation would extend these same credits until 2016.

Of the total solar-energy market, 95% is dominated by photovoltaic solar power, which directly converts the sun's rays into electricity. These panels use silicon, a material that raises its own environmental red flag, though industry professionals claim it has had no proven negative effects on the environment. In 2004, high demand for solar panels led to a bottleneck in the supply chain of silicon, driving up prices—and providing opportunities. "There's currently a lot of money being invested in new silicon production capacity to respond to the demand," says Chase.

But despite growth in the sector, solar power still plays a minimal role in energy production, with only .03% of worldwide electricity generated from photovoltaic power. As Chase points out, the technology is still underdeveloped, though that hasn't stopped innovative engineers and designers using what's available to produce viable, commercially focused products.

One such group is London-based SolarLab, which was founded in 2006 by Swiss-born Christophe Behling. Behling, a designer who has previously worked with companies such as Tag Heuer and Nokia (NOK), has created items from luxury products to solar vehicles. He designed the world's largest solar-powered vessel in Hamburg, Germany. The Hamburg Solarshuttle seats 120 passengers and was launched in 2000. To date, Behling has designed over 40 solar-powered water vessels, from large, commercial boats to smaller, private boats for personal use.

Slow Boat to Hyde Park

"The costs can be recovered on a boat like this in as little as three years," says Behling. "If you were to build a solar powered boat to the same size as a boat with a diesel engine, you would save 15% to 20% from the cost of fuel alone."