An interesting piece today on alternative energy stocks in the Los Angeles Times.

It quotes a hedge fund manager who makes an arresting and salient point which I shall paraphrase;

Why does the wind industry which has built five times the capacity of solar around the globe have a smaller market capitalisation?

It's not just market capitalisation. Leaving aside what the market thinks, there are some irrefutable advantages that utility scale wind power has over solar;

i) Can operate at up to four times the load factor - 40% at best, compared to a typical 10% for solar
ii) Costs at least half as much per installed megawatt - about $1.6m compared to around $4-6m
iii) Recoups the energy spent on manufacturing in months rather than years

Ok, now let's look at it the other way round. What does solar offer over wind?

i) Small and surmountable planning hurdles, if any at all - a big problem well known to any wind farm developer
ii) No threat, real or perceived, to wildlife - either from bird/bat strikes or resonance
iii) Easier load-balancing of micro amounts of electricity at the local level rather than at grid utility scale, negating the need for energy storage or cross stabilization of grids from neighbouring countries

These are all quite important, but not winning arguments per se. Wind still offers much larger amounts of power for much less. So the question begs, why is solar still more popular with investors?

i) Arguably, far more potential for falling costs - if you believe Photon Consulting, grid parity by 2010
ii) Solar has an intangible high-tech panache - not to be underestimated amongst fashion-following investors
iii)  Geographically, solar is a little bit tied up with the China Growth Story - i.e. they make it, California and Arnold Schwarzenegger, a resurgent Germany under Merkel - wind  is about Denmark (no more wind turbines going up there and the most expensive electricity in Europe), Texas (yes, thanks to - don't mention it ! - then Governor George Bush who passed the Renewables Portfolio Standard), Spain (now looking a bit yesterday after the mother of all real estate crashes) and  Germany's lost decade of growth post-reunification under Schroeder. Ok, I admit, these last points are a bit weak. But the background narrative to solar is just more obviously appealing.
iv) The upside, could be enormous. If solar power falls to a price where you can, without subsidy, consider the deployment of solar panels on your roof as a forward purchase of electricity that will pay for itself after a few years on a yield of say 10%, the numbers prepared to do it could, no pun intended, go through the roof.

So there you have it. What investors see in solar power is future gain, not current limitations. And it is hard to see much more wind power being deployed in Germany, whereas there is still a lot of upside in solar, the world over. Where I would be cautious however is on grid parity. Wind is able to achieve - without subsidy - better than natural gas-fuelled grid parity in Texas and the Republic of Ireland.

But no one much is that excited about it and proclaiming this a new dawn, etc.