I get very excited when I picture the clean-energy contribution of offshore wind. According to the U.S. Department of Energy, the generating potential of offshore wind equals the entire generating capacity of the current U.S. electric system! And that’s just in areas with less than 100 feet of water. If you include all of the potential offshore wind capacity, it increases to four times the current U.S. electrical generation!.

Offshore wind turbines of the shores of Denmark

The upside of offshore wind is that it has a much smaller environmental footprint, so it is hard for locals to justify opposition to these projects. The downside offshore wind is it is more expensive to develop than onshore. But if it’s possible to build offshore oil rigs that drill in a mile of water, then surely technologies for offshore wind will continue to improve.

It is no wonder, then, that in September the U.S. Department of Energy awarded $43 million to stimulate development offshore wind development. It funded 41 projects in 20 states in areas that will advance offshore wind technologies and remove market barriers. For example, $6.7 million is going toward improving modeling and analysis tools specific to marine environments in order to improve design and cost estimates.

I also read with interest about the sale of a privately held German company, BARD Holding. BARD is one of the biggest players in offshore wind. This could be a huge addition to any company’s portfolio, as there is no doubt that offshore wind will be a growth industry. Bloomberg reports that General Electric (GE) may be interested in BARD, or another large buyer in Asia or Europe.

Either way, offshore wind offers an exciting growth opportunity in alternative energy.

First Solar FSLR is one of the biggest pure-play alternative energy companies. This solar powerhouse had $2.5 billion in sales in the last 4 quarters, and has a market cap over $6 billion, making it by far the largest U.S. solar manufacturer. So it is no wonder that investors in solar are disappointed in the 53% drop that First Solar has had in the last 6 months.

But where is the stock likely to go in the future? It is certainly possible that there may be further bad news about First Solar which will drive down the stock price, like the recent hit the stock took over missed loan guarantees. On the other hand, a technical look at First Solar’s price chart shows why I believe a long-term bottom has been reached.

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Stocks commonly move in three waves, both on the up side and the down side. This price chart shows three well developed down waves that started in February 2011. The first leg down is the “worry” phase, where investors start to get antsy but then breathe a sigh of relief when prices recover. The second phase reflects “panic.” Confusion reigns – some people are selling stock, some are buying, but no one really knows what to do. The last phase is “capitulation” where investors are screaming at their brokers “get me out at any price!” Why do I think capitulation has occurred? A look at the next chart is very telling.

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This graph shows the same price chart as before, with trading volume included (blue bars at bottom). During the most recent leg down, or “capitulation” phase, there have been three drops on steep volume – at the end of June, the end of August, and the end of September. The white line in the volume part of the chart shows the 5-day moving average. This line went higher and higher with each consecutive price drop, so in each sell-off volume was increasing. The last steep drop was on very high volume, a true capitulation event.

My conclusion is that this selloff is overdone, and First Solar will bounce back up from here. Using an average of forward and trailing earnings, I calculate the stock to be undervalued up to $100/share, and at fair value at around $127/share. The long-term investor should be rewarded accumulating First Solar at these prices.

Many have predicted that the current glut in solar cells will affect the price of photovoltaic panels. In order to move their inventories, factories are indeed dropping prices. According to Ernst & Young, prices for installing a solar panel have dropped from $2.00/unit of generating capacity in 2009 to $1.50 today. It is expected that the drop will increase to $1.00 by 2013. This trend is verified by Solarbuzz®, which is graphed on the chart below.

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The black line shows the price of the photovoltaic (PV) component that goes into making a solar panel. The blue lines illustrate the entire cost of a solar system (inverters, batteries, etc). These prices do not include installation costs. The chart shows the monthly change in price, so a falling line reveals an acceleration in the rate of price reductions. This drop in pricing has hurt manufacturers, none worse than Solyndra, Inc., which will be filing for bankruptcy.

Solar developers, however, have benefited greatly from the drop in prices. In the U.S. alone, Solarbuzz® reports that in just 2 months utility-scale solar projects have increased 41% to 24 gigawatts. In addition to these U.S. projects, there have been numerous large-scale developments announced abroad, including projects in Bangladesh, China, Italy, Germany and Peru.

So while solar manufacturers have been negatively affected in the short term, the solar industry as a whole is taking advantage of these price drops to move the project pipeline forward. This trend, which is likely to continue through this decade, bodes well for long-term investors in alternative energy companies.

This weekend was a difficult and poignant time of remembering a day that changed the world. The horrific events that unfolded on that day 10 years ago hit me in the gut all over again. I hope the memorial ceremonies in New York and around the country helped further the healing process for families and friends directly affected by these tragedies.

We all know now, 10 years later, that New York has come back stronger than ever; but what happened to the stock market during the ensuing days after 9/11? It is instructive to look at how the market behaved after this tragedy.

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For the financial professionals of the day, the initial shock quickly transformed to confusion and worry. This event came off the heels of the burst in the Tech bubble, which had already caused the S&P 500 to drop 29% from its peak in March of 2000.

The market had formed a bottom in April 2001, so there was hope that the tech sector had corrected and the worst of the tech wreck was over. Before the attack, investor sentiment had not fully shifted away from the jubilant days of the ever climbing stock market of the late 1990’s. After the attack, no one knew what to expect.

A tragedy of this magnitude had never happened in the financial center of the world. How long would the New York Stock Exchange (NYSE) trading floor be closed? Would the financial center of gravity drift away from New York City and relocate in another part of the global? What would happen to the stock market when it finally reopened?  

Exciting news for the alternative energy industry has recently emerged from South America’s largest country, Brazil. Brazil is developing its economy at a rapid pace, lifting many of its citizens out of poverty and into a fast growing middle class. To provide electricity to what is expected to be a 60% growth in power consumption in the next 10 years, the Brazilian government held an auction to gather bids to supply electrical power to its utilities. Bids were accepted from traditional natural gas providers, as well as wind, hydro and biomass developers. Due to the falling cost of wind turbines, a collective of 44 wind projects came in with a bid at a lower cost than the natural gas power plants could provide.

The wind farms won over a third of the total electric capacity that was contracted, offering a price of 99.58 Brazilian Reals (about $60 US dollars) per megawatt hour. This beat out the price for natural gas projects, which came in at 103 Brazilian Reals per megawatt hour. The President of Brazil’s Energy Research Company (EPE) affirmed the importance of this landmark for renewable electric generation:

 That wind power plants have been contracted at two digit prices, below R$ 100/MWh, showcases the energy market competition through auctions.  That wind power could reach these lows vs. natural gas was unimaginable until recently.”  – Mauricio Tolmasquim

Alternative energy companies that are involved in the wind projects include General Electric GE, Siemens and Vestas. Of these, GE and Seimens are both components of the Roen Financial Report’s Paradigm Portfolio. Though both of these companies are major players in supplying wind turbine components and services, they are large conglomerates with wind being only a small part of their overall business. Still, both companies have done well since their addition to the portfolio in May 2009 (click here for a sample company report). Also, it is evident that both clearly see a future in alternative energy.

As the price of building wind turbine projects continues to drop, we should be seeing more good news like this in the future.