by Ryan Fitzwater, Investment U Research
Friday, February 3, 2012
While the story for solar power in the developed world has been nothing investors can clap about, they might find something worth their applause in emerging markets.
For a majority of the world, solar power costs much more than energy from conventional power plants, particularly if you include battery costs for storing energy. But for those living in undeveloped regions, solar power actually offers substantial benefits in cost.
The dropping prices of polysilicon, coupled with other technological advances, are opening up an enormous market for solar power. Along with some incredible buying opportunities for solar energy stocks.
Currently there are about 1.3 billion people around the globe who live in areas that have no access to grid electricity. And while most of these people are very poor, they actually pay a lot more for lighting their homes than people in developed countries.
Why are people paying more for lighting in undeveloped areas?
Because they?re using inefficient kerosene lamps, an archaic technology widely used almost a century ago in the United States.
It Makes Economic Sense
Today, kerosene lamp lighting costs twice as much compared to solar power.
Then there?s safety.
It?s estimated that 1.6 million people are killed each year due to indoor air pollution caused by burning kerosene, not to mention the deaths that occur from fires. And safe, solar powered bulbs can be 10 to 20 times brighter than kerosene lamps.
The switch to solar isn?t just for providing safer and cheaper light; there?s another power demand on the rise? mobile phones.
Mobile phones have become increasingly popular in Africa, where half the population of one billion now has a mobile phone. But in order for many to charge their phones, they have to rent a charger since they have no grid access or other form of electrical power.
The innovative companies below have seen an opportunity here, and are manufacturing and selling inexpensive solar lamps with special plug-ins for cellphones.
A Tool to Change the World
The San Francisco-based company d.light offers their d.light S250, a solar lamp with a mobile-phone charger that can provide up to 12 hours of light on a single day?s charge.
Currently on display in the British Museum, its curator Neil MacGregor has written a book A History of the World in 100 Objects, where he describes the d.light S250 as a tool that will change the world.
The S250 provides a highly efficient LED light that can illuminate an entire room and last over 50,000 hours. With four different brightness settings, it can provide up to 12 hours of bright light and 100 hours of bed light setting.
The S250 also offers the convenience of in-home mobile-phone charging. Designed with an outlet that can charge a wide range of mobile phones, it takes away the need for people to go out and rent costly chargers.
And the S250 is not alone; the company provides three different solar lantern models costing from $10 up to $45.
The company has really cracked into this market, and has sold more than a million lights in 40 countries. But d.light has even bigger goals for the future.
By the end of 2015, they hope to have their products in the hands of 50 million people. And by the end of 2020, they expect to have improved the quality of life of 100 million people.
Eight Minutes and Nineteen Seconds
Another smaller player trying to grab a piece of this growing market is Eight19. Based out of Cambridge, U.K., the company takes its name from the time it takes sunlight to reach the earth ? eight minutes and nineteen seconds.
What separates Eight19 from d.light is its larger IndiGo system that includes a 2.5-watt solar panel (installed on the roof or a pole outside a home), a lithium-iron phosphate battery pack and two LED overhead lamps.
The cost for IndiGo is less than $50 and pays for itself in less than two year. And while the upfront price is too costly for many, Eight19 (along with other companies) offers a payment plan to make the system affordable.
Customers simply pay $10 for the system upfront and then pay a weekly fee for the power it generates. Every week, IndiGo users go to a local vendor and buy a scratch card for about $1. The card will give them a number that they then text to Eight19 for verification.
The company texts them back a code they put into a keypad that unlocks electricity from the device for a week, supplying power to the phone charger and LED lights.
While several competitors are trying a pay-as-you go system, Eight19 is ahead of the curve since they let customers upgrade their system once they have paid off their previous device (which takes about 18 months).
IndiGo customers can upgrade to bigger solar panels, larger batteries, more lights and the ability to power smaller devices.
It?s a great system. By using the money that would have been spent on renting cellphone charges and kerosene, customers can instead progressively build up their system.
Eventually a home could have enough power for larger appliances like refrigerators, or a sewing machine (something that can make them some money).
This technology can bring light and electricity not to just homes, but schools and workplaces in developing markets. Helping power internet connections, enabling laborers to work through the night and providing light for children to do their homework in the dark.
A Brighter Future for All
This is an incredible opportunity to invest in solar energy stocks. All the conditions are right for these solar power products to expand in emerging markets.
You have large, poor rural populations living in excessively sunny regions with no access to grid energy, who are also currently paying excessively high prices for their lighting needs.
For those who can even afford power, they spend a large portion of their income on kerosene for lamps (which provides no return) or have to travel to bigger towns a number of times a week to charge their phones.
Amid the declining cost of batteries, LED lighting and solar panels, in concert with inventive business plans, millions of households in Africa and other developing regions will continue to switch from unsophisticated kerosene lamps to safer and cleaner solar electrical lighting.
And while the companies mentioned above aren?t publicly traded, investors should keep an eye on the growing solar demand in emerging markets.
Two Solar Energy Stocks
Those who produce solar panels, like First Solar, Inc. (Nasdaq: FSLR), and manufacture polysilicon, like GT Advanced Technologies, Inc. (Nasdaq: GTAT), will start to see demand for their products increase as people with no access to grid energy continue to purchase products from companies like d.light and Eight19.
Good investing,
Ryan Fitzwater
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