Solar Power Energy
This paper was written to discuss predict the future environment analyzing trends of the macro and micro economic indicators for Evergreen Solar Inc.
Sales
ESLR main revenue comes from the sale of solar modules. The solar modules are sold using resellers such as distributors and system integrators. The marketing of these products are sold using an on-grid and off grid presentation. The on-grid means simply that solar modules can be used collectively in an on-grid type system where electricity and solar power can be simultaneously used. The off-grid type system means that the solar modules can be use where solar power is the only form of energy and is therefore a stand-alone energy product. ESLR stated, “The products are currently sold primarily in Germany and the United States” (Evergreen Solar 2006).
ESLR manufacturing and sales problems are constrained by the size of the manufacturing plant in Marlboro, Massachusetts. The plant is also used for the research and development of new technologies and more effective energy output. Because of the plants physical size solar modules sales are at there maximum capacity. ESLR stated that they “do not expect to significantly expand its manufacturing capacity, rather, such expenditures will be used to demonstrate improved technologies” (Evergreen Solar 2006). It is apparent that although ESLR could increase their sales they will not until they can improve the overall quality of their product.
Therefore, based upon the reluctance of ESLR to increase their production capacity the projected sales of solar modules should remain the same as in 2007.
Energy Sales by Sector Projections
Energy sales by sector projections are anticipated to increase over the next few years. However, as the cost of other than fuel energies such as oil, gas, electric, nuclear power, etc continue to increase in price the demand for other energy sources such as solar energy will increase. As the research and development of solar energy increases the demand for oil, gas, electric, nuclear power, etc, will decrease and so will the prices. However, until alternate sources of energy can reach a point of matching the energy levels currently produced by electricity, gas, etc, then solar energy will continue to be seen as a cub standard and expensive product (Appendix C).
Economic Growth
According to the Department of Energy (DOE) the US Gross Domestic Product is expected to expand at an average annual rate of 2.4 % up to the year 2030. The DOE stated that the reason for a slower than initially anticipated GDP is due to the lower productivity rate in the United States. In addition, the DOE stated that nonfarm labor productivity only grew 1.9% in 2007 compared to an estimated 2.3%. The DOE stated that the projected nonfarm employment annual growth rate of 1.3% is projected thru 2030 (Energy Information Administration, 2008).
Because the US has not met the demands of the growing population the demand for more electricity, gas, oil, etc has greatly increased. The US has simply not invested enough money in infrastructures that will meet the energy demands. In addition, as the current energy infrastructures continue to decrease in productivity levels due to age creates more of a gap in meeting the countries energy demands. As the demand for energy increase, the cost of energy will also increase (Evergreen Solar 2006).
Fossil fuels are limited and the U.S. domestic supply of liquefied natural gas (LNG) is not expected to meet the US demands by the year 2025. As the US still engages in global terrorism the disruption of production in oil producing countries, like Iraq, Darfur, etc, has a major impact in the prices worldwide. However, “ESLR believes that future demand for electricity will not be met through traditional fossil fuel-based generation technologies alone” (Evergreen Solar 2006). Until solar energy can meet or exceed the demands
Energy Consumption
According to International Energy Outlook, (IEO) expects world energy consumption to increase 60% by the tear 2020 (International Energy Outlook, 2000). Part of the reason for the large influx in energy consumption is due to the countries like China, Romania, and Russia that are growing rapidly due to their expanding economical gains and increase in world market shares (International Energy Outlook, 2000).
The IEO is also projecting that natural gas will be primary means for energy and is expected to double in consumption rate by the year 2020 (International Energy Outlook, 2000). One major advantage to the use of natural gas is because it is more environmentally friendly and emits sulfur dioxide and carbon dioxide compared to oil and coal (International Energy Outlook, 2000).
The IEO is projecting a decrease of only one percent a year by world consumers switching to other energy alternatives than oil. However, IEO stated that because other alternative energy products are not available or not economically feasible oil production “is expected to contribute 42 percent of the total increase in petroleum consumption in the developing countries (International Energy Outlook, 2000).
IEO is also stated that “two of the key countries in the region—China and India—are projected to account for 97 percent of the world's total increment in coal use” (International Energy Outlook, 2000). The reason that coal is so predominantly used in China and India is based upon price. Coal is the cheapest energy consumable items for China and India. In addition, the aged electrical infrastructures of those countries results in places like Beijing to emit toxic levels of pollution into the air and waterways.
Energy Trends
Import energy projections for the next few years are projected to increase in the US according to the department of energy, (Appendix E). However, as companies like ESLR continue to define and produce better solar energy modules could possibly change this. According to the DOE (Energy Information Administration, 2008) the following energy trends are projected to the year 2030.
Higher price projections for crude oil and natural gas
Higher projections for delivered energy prices, reflecting both higher wellhead and minemouth prices and higher costs to transport, distribute, and refine fuels per unit supplied
Slower projected growth in energy demand (particularly for natural gas but also for liquid fuels and coal)
Faster projected growth in the use of nonhydroelectric renewable energy, resulting from a revised representation of State renewable portfolio standard (RPS) provisions
Higher projections for domestic oil production, particularly in the near term
Slower projected growth in energy imports, both natural gas and oil
Slower projected growth in energy-related emissions of carbon dioxide (CO2).
The IEO also is projecting based upon the cost of oil that the demands for nuclear power plants will increase. This may levy the overall world energy consumption issues but it may also create the potential for countries like Iran and North Korea into turn a positive energy source into a nuclear holocaust. Therefore, the negative potentials can also outweigh the positive energy consumption issues. The IEO stated that “aggressive plans to expand nuclear capacity, mainly in the Far East, lead to the near-term increase, but plant retirements in the United States and other countries exceed total new additions worldwide and produce a decline later in the forecast” (International Energy Outlook, 2000).
Market Shares
The DOE (Energy Information Administration, 2008) has listed the below World Annual Energy Consumption Rate Projections until the year 2030 were listed as follows (see appendix A for graph chart)
Average Annual Energy Projections to 2030 |
|
OECD North America |
1.3% |
USA |
1.2% |
CANADA |
1.3% |
MEXICO |
2.5% |
EUROPE |
0.7% |
ASIA |
1.0% |
JAPAN |
0.3% |
SOUTH KOREA |
2.2% |
Australia/New Zealand |
1.2% |
Russia |
1.6% |
China |
4.2% |
India |
3.2% |
Middle East |
2.4% |
Africa |
2.8% |
Central and South America |
2.8% |
Total World Annual Projected Increase |
2.0% |
Based upon the above figures solar energy could have a huge impact in gaining a tremendous amount of market shares once it becomes fully functional. Solar market shares have the potential to be huge. If China has an annual energy rate of consumption of 4.2% per year between 2008 thru 2017 they would have increased in energy consumption 42%. If solar energy can capture even 5% of the 43% the potential of large profitable returns can be enormous. In fact, the IEO stated that “China's energy intensity is expected to continue to improve over the projection period, it remains about three times the level of energy intensity in the United States even in 2020” (International Energy Outlook, 2000).
Solar Employment Projections
According to the DOE, (Energy Information Administration, 2008) the following projections were made based upon the past solar employment history for 2008, 2009, and 2010:
2001 |
19 |
2,666 |
2002 |
19 |
2,696 |
2003 |
20 |
2,590 |
2004 |
19 |
2,916 |
2005 |
29 |
3,198 |
2006 |
41 |
4,028 |
2007 |
31 |
3,764 |
2008 |
32 |
3,980 |
2009 |
33 |
4,196 |
2010 |
35 |
4,412 |
However, these figures can greatly increase if breakthrough technology can found to greatly increase the proficiency of solar energy and thus reduce the cost.
Conclusion
Although Evergreen Solar Inc has produced no dividends to common shareholders since their inception, the domestic and international market demands are slowly increasing by the demand for alternate power sources. As the price of a barrel of crude oil continues to increases the demand for alternative fuel sources also increase. As the demand for alternative fuel sources increase the demand for company's products like ESLR will also increase. The growth potential for the company is slowly increasing as ESLR continues to research and develop alternate fuel power sources.
References
Energy Information Administration, (2008). Annual Energy Outlook 2008. Retrieved on May 10, 2008 from http://www.eia.doe.gov/oiaf/aeo/growth.html
Energy Information Administration, (2008). Retrieved on May 10, 2008 from http://www.eia.doe.gov/oiaf/forecasting.html
Energy Information Administration, (2008). Solar Photovoltaic. Retrieved on May 10, 2008 from http://www.eia.doe.gov/cneaf/solar.renewables/page/solarphotv/solarpv.html
Energy Information Administration, (2008). World Total Energy Consumption by Region. Retrieved on May 10, 2008 from http://www.eia.doe.gov/oiaf/ieo/pdf/ieoreftab_1.pdf
ESLR, (2006). Annual Report. Retrieved on April 12, 2008 from
http://library.corporate-ir.net/library/12/123/123321/items/253195/ESLR06AR.pdf
International Energy Outlook, (2000). Retrieved on May 4, 2008 from http://tonto.eia.doe.gov/FTPROOT/presentations/ieo2000/sld001.htm
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