Sunday, November 22nd, 2009

What You Need to Know About the Coming Solar ‘Gold Rush’

Sep 1st, 2008 | By Justice Litle | Category: Featured, Financial News

Taipan Publishing’s Justice Litle says solar energy in the U.S. is about to take off.

Goldman Sachs (NYSE:GS) is buying up tens of thousands of acres of empty Nevada desert. And industry experts forecast a $45-billion market developing over the next decade, with Nevada at the heart of it.

As momentum builds, Justice says there will be big profits up for grabs for investors with their fingers on the pulse.

There’s something big going on out west. Some think of it as a new “gold rush” – and the biggest profit opportunities are still yet to come. Did you know that the great state of Nevada is pretty much empty?

And most of that empty Nevada land is federally owned – more than 85%. (Alaska comes in a distant second, at roughly 67%.)

If you don’t live here, it’s hard to get a sense of how big and open the West is. (Did you know, for example, that Reno-Tahoe is an eight-hour drive from Las Vegas? Back east, that’s enough driving to cut through three states.)

So all this begs an odd question: Why in the heck is Goldman Sachs, a hot-shot New York investment bank, buying up tens of thousands of acres of empty Nevada desert? What do a bunch of East Coast city slickers care about sage brush, rattlesnakes and coyotes?

For the answer to this question, look just a little further west to Nevada’s neighbor state. California’s barren Mojave Desert is ground zero for this new phenomenon that has a whole host of deep-pocketed players scrambling. Their goal? To make huge amounts of money, of course… but to do it by providing the 21st-century answer to America’s electricity needs.

The reality is there’s not much you can do with empty desert. For the most part it’s too hot and too dry to grow crops. But there is one harvest the desert offers bountiful amounts of, day in and day out: sunshine.

The West’s endless rolling stretches of cracked, dry hardpan are the perfect place to put up huge solar mirrors by the thousands. Out here, mass-scale solar installations can follow the arc of the blazing hot sun from dawn till dusk. The systems are pretty much self-contained, so maintenance workers only have to drive out every so often to check on things. As a long-term energy solution, the setup is almost perfect. (Key emphasis on “almost,” as you’ll see in a moment…)

This explains why Goldman has staked a claim to 40,000 acres of empty Nevada desert – and why the bank wants to buy more. Utility companies, silicon valley start-ups, European and Israeli energy firms… all are pushing hard to buy up available Western land.

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As the competition heats up, bidding wars are breaking out. Fortune magazine calls it a “solar gold rush,” noting that “it’s not just a federal land grab either. Buyers are also vying for private property. Some are paying upwards of $10,000 an acre for desert dirt that a few years ago would have sold for $500.”

The thing is, as empty as the West is, most of that prime desert land is still off-limits to solar development (or any kind of development for that matter). The BLM, or Bureau of Land Management, is notoriously slow in granting requests for new solar sites.

And hardcore environmentalists – the “eco-warriors” who should be more enthused about solar than anyone – are turning out to be a big obstacle to new solar sites. Rightly or wrongly, their concern for protecting desert habitats and rare plants and species makes it very hard to get approval. This is why the few uncontested sites are being snapped up fast. If you can get your hands on 10 or 20 square miles with no rare cacti or tortoise tracks, your solar site can be up and running that much faster.

So how can you and I profit from this?

To be frank, you don’t want to mess with buying desert land. That’s an expensive, labor-intensive game that requires millions of dollars (preferably tens of millions), mountains of paper work and dedicated scouts to eyeball all the potential sites.

The good news is, this “solar gold rush” is just the preliminary stage of something much bigger. That’s why industry experts at Emerging Energy Research of Cambridge, Mass., think “Big Solar” could become a $45 billion market over the next decade or so.

When the solar power industry reaches a certain “tipping point,” you’re going to see a snowball effect kick in. It may in fact be happening right now.

In the early stages, it’s very hard for a new industry – especially an energy-related industry – to get a real foothold. It’s a kind of classic “chicken and egg” problem. Without strong demand, there isn’t enough support to build out the new industry at a viable scale. But without pre-existing industry support — factories, maintenance workers, tried and true technology and so on – there isn’t enough infrastructure backbone to justify strong demand.

The only way to get around this Catch-22 is to move forward slowly, inch by inch… until some kind of breakthrough happens. Maybe a new manufacturing process changes the game. Maybe economies of scale kick in just enough to start building momentum. Or maybe demand trends pick up enough to start generating a positive feedback loop, which in turn creates more and more demand.

Whatever the catalyst, when a new industry finally breaks through and hits critical mass, what comes next can be very exciting. News stories like this one, from The New York Times just a few weeks ago, shows that the solar “tipping point” is on the verge of being reached:

In recent months, chains including Wal-Mart Stores, Kohl’s, Safeway and Whole Foods Market have installed solar panels on roofs of their stores to generate electricity on a large scale. One reason they are racing is to beat a Dec. 31 deadline to gain tax advantages for these projects.

So far, most chains have outfitted fewer than 10 percent of their stores. Over the long run, assuming Congress renews a favorable tax provision and more states offer incentives, the chains promise a solar construction program that would ultimately put panels atop almost every big store in the country.

Here at Taipan, our editors are well placed to book profits on this booming solar mega-trend. We’ve already seen some powerful gains, but those are just the beginning… Rest assured, there will be much bigger gains to come.

Source: Why Does Goldman Sachs Own 40,000 Acres of Empty Nevada Desert?


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By Justice Litle

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About the Author

Justice LitleJustice Litle is Editorial Director for Taipan Publishing Group. He is also a regular contributor to Taipan Daily, a free investing and trading e-letter, and Editor of Taipan's Safe Haven Investor and newly introduced research advisory service, Macro Trader.

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Taipan Daily is your free resource for late-breaking investment opportunities to help you beat Wall Street to the profits. Filled with investment analysis and insight from every sector. Taipan Daily delivers just the right blend of safe opportunities with the fast-moving plays, so you have an insider's edge over Wall Street and other investors.

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