Here’s the Problem Solar Power Stocks Face Now

With the demand for “being green” higher than ever before, finding alternative forms of energy has become a popular topic of debate and conversation. However, there is one alternative energy source no one seems to be taking seriously right now: solar power. Just take a look at the stocks for once hot companies such as Suntech Power Holdings (NYSE:STP), First Solar (NASDAQ:FSLR), SunPower Corporation (NASDAQ:SPWR), LDK Solar (NYSE:LDK), and Yingli Green Energy (NYSE:YGE).

The problem facing solar power is that it’s currently just too expensive. The technical reason for this is called grid parity. Grid parity occurs when the costs of generating a certain type of energy become competitive with those of other sources. Solar power is far from achieving grid parity, and until it does, it simply won’t be viable.

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Catherine Wood of AllianceBernstein estimates that one would have to charge $375 per megawatt hour to justify investing in new solar equipment. That figure is nearly four times the average retail price of electricity in the United States.

Wood also added that there are more factors to consider when weighing the current value (or lack thereof) in solar power investment. The costs of backup power sources and real estate, which aren’t included in the figure above, cannot be ignored. Any utility-scale solar installation would require a battery or some other form of stored energy supply to maintain operation when the sun isn’t shining. Of course, the installation would also have to sit on a piece of land. Neither of those additional requirements is cheap.

Unfortunately, until these issues and others are addressed and grid parity can be achieved, businesses will continue to shy away from aggressive investment in solar technology.

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