Is There a Solar Bubble?

Parallels with now-depressed ethanol stocks sure to scare investors
By Nick McMaster,  Newser Staff
Posted May 22, 2008 4:01 PM CDT
Mark Vargas shows the solar panels on the roof of his home in Santa Clara, Calif., Friday, Feb. 15, 2008.   (AP Photo/Jeff Chiu)
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(Newser) – Stocks in solar-energy outfits are enjoying a sustained rally, but investors should remember the lesson of ethanol, Mark Gongloff writes in the Wall Street Journal. Once-loved ethanol stocks are now widely scorned—mainly because the energy source will never be viable without government subsidies. Still, despite solar’s advantages, shares are far from a sure bet.

Like ethanol, solar could be negatively affected by prices of certain commodities—chiefly silicon, which has been skyrocketing; with its myriad uses, the sun won't likely set on demand anytime soon. And like any stock, Gongloff reminds, a glut of entrants in coming years could diffuse the sector’s gains.