Alternative Energy Watch: Breaking the Wind Model; Solar Costs Falling (AMSC, VWSYF, GE, XJNGF, JASO, CSIQ, YGE)

It is time for our daily review of the alternative energy sector, and some of it is far from pretty. There is an awful development in China on wind power orders and there is some data we have expected in solar.  American Superconductor Corp. (NASDAQ: AMSC) shares are taking an awful beating today after the company’s announcement that its largest customer, Sinovel Wind Group Co., Ltd. has refused to take delivery of contracted shipments components and spare parts for 1.5- and 3-megawatt wind turbines. The company believes that Sinovel is working through existing inventory before taking any more deliveries.

That could well be, but that’s not the problem. According to AMSC, Sinovel has failed to pay for some $56 million worth of products the Chinese firm received in the last three quarters of fiscal year 2010. Sinovel is the world’s second largest wind turbine maker with 11% market share. It trails Denmark’s Vestas Wind Systems A/S (OTC: VWSYF), which claims 12% market share, and it leads General Electric Co. (NYSE: GE) and Xinjiang Goldwind SC (OTC: XJNGF), each with 10% market share.

Sinovel is AMSC’s largest customer, accounting for 70% of the company’s 2010 revenue. That is a dangerous situation for any company, and particularly so for a company that depends so heavily on government policy for revenue. China installed 18,900 megawatts of wind generation in 2010, out of a world-wide total of about 38,300 megawatts. That’s more than half. Given those numbers, AMSC might be forgiven for focusing so acutely on China.

China claims total installed wind capacity of 44,500 megawatts, of which just 31,700 megawatts are grid-connected. Here is where AMSC could stand to make up some of its losses on wind turbines. AMSC is the largest maker of high-temperature, superconducting wire capable of carrying 150 times the power of conventional copper cable. The company made a large sale of the wire to South Korea in 2010, and there is no reason that even more sales lie on the horizon in China, provided that AMSC doesn’t squawk too much about payment from Sinovel.

Of course shareholders don’t see it that way. Near mid-day, AMSC shares are down nearly -45%, to $13.80, after setting a new 52-week low earlier of $12.54. The new 52-week range is $12.54-$38.88.

Bloomberg New Energy Finance estimates that the cost of large solar PV projects will be cut in half by 2020, making it a stronger competitor against fossil fuel generators. Cheaper solar panels from companies like JA Solar Holdings Co., Ltd. (NASDAQ: JASO) Canadian Solar Inc. (NASDAQ: CSIQ), and Yingli Green Energy Holding Co. (NYSE: YGE) are reducing costs both through better technology and better manufacturing techniques.

Solar PV installations totaled about 18,600 megawatts in 2010 and are expected to nearly double to 32,600 megawatts by 2013. Capacity ramp-ups this year could lead to lower prices and margins for polysilicon solar PV modules, but in the medium-term the new capacity could pay substantial dividends.

On the finance front, Cleantech Group has said that venture investments in North America, Europe, China, and India in the first quarter of 2011 totaled $2.57 billion. That’s a gain of 52% sequentially and 31% year-over-year. About 93% of the funds, $2.4 billion, were follow-on investments. Solar investment totaled $641 million in 26 deals, while investments in transportation totaled $311 million in just 8 deals. Biofuels companies raised $148 million in 13 deals, with Fulcrum Bioenergy, a California firm developing a method for converting solid waste to biofuel, garnering $75 million.

Venture investments in North America accounted for 85% of the funding, or $2.2 billion. India ranked behind only the US and Canada in the amount of funds raised in the quarter.

Paul Ausick