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Are you looking to invest in, attract investors for, provide services to or 
understand the business and technology dynamics of the hottest companies 
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"Global Power & Western U.S. Coal:  Domino Factors at Play in Today's Energy 
Markets" is the theme of the 2001 Spring Pacific Coal Forum (Coal Forum'2001) 
to be hosted by the Western Coal Council, June 4-6, 2001 in Park City, Utah.  
Keynote Speakers include: Honorable Mike Leavitt, Governor, State of Utah; 
Hitoshi Tagawa, Tokyo Electric Power Company; Eng. Jesus Buentello, Comision 
Federal de Electricidad; Malcolm Thomas, Kennecott Energy Company; Manfred 
Raschke, International Strategic Information Services (ISIS).   
Contact Janet Gellici at (303) 431-1456 or info@westcoal.org 
www.westerncoalcouncil.org.
Correction to 5/14/01 IssueAlert
The chairman of the Public Utility Commission of Texas is Pat Wood III, not  
Carl Wood as stated. Pat Wood III has been nominated for a position with 
FERC. 



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May 15, 2001

Bright Skies Ahead for Solar Power? 

By Will McNamara
Director, Electric Industry Analysis 

[IMAGE]Shares in companies that make alternative energy technologies have 
climbed as a result of California's latest round of statewide blackouts. 
Shares in solar power producing companies in particular have embarked on a 
recent increase. For instance, Evergreen Solar (Nasdaq: ESLR) recently jumped 
up about 6.8 percent, to be currently priced at $10.35 (representing an 
annual increase of 76 percent). Evergreen's main competitor AstroPower 
(Nasdaq: APWR) gained about 4.2 percent and is currently priced at $45.16 
(representing an annual increase of 55 percent). According to a report in 
Reuters, James Logerfo, an analyst with Bank of America Montgomery, concluded 
that the increase is "speculative buying across the energy industry. Some are 
buying without appreciating how far away these companies are from having real 
products and some are building for a trade this summer. They are not buying 
to hold the stocks for five years, but for five months or five weeks." 

Analysis: Regardless of the prospectus for solar power stocks, it certainly 
appears that solar power in general is finding a new niche as a direct result 
of compromised supplies of more traditional fuel sources such as natural gas. 
Renewed interest from investors in solar power is probably a direct result of 
concerns about existing power supply in a handful of Western states. However, 
at the same time, solar power companies such as Evergreen Solar and 
AstroPower also are turning in strong profits for 1Q 2001, which represents a 
positive turnaround for both companies. The combination of strong investor 
interest and an upswing in profits indicates that solar power could be 
embarking on a market boom that up to only a few years ago was seen as very 
unlikely. The question is whether the turnaround will be temporary, or if 
solar power companies truly have found a permanent "place in the sun." 

Companies involved in solar energy typically have a business model that is 
founded on the technology of photovoltaics, which is basically the process of 
absorbing photons from the sun or other light sources and turning them into 
electrons. According to recent reports, demand for solar cells grew by 40 
percent in 2000. Questions about the reliability of power supply provided by 
traditional utilities that have been sparked by the California situation 
presumably will only result in greater interest. Consequently, those 
companies that have been on the forefront of solar power research and 
development for years are now starting to reap the benefits of their 
efforts.  

Recent financial reports seem to support this theory. For instance, Evergreen 
Solar-which develops, manufactures and markets solar power products based on 
its patented String Ribbon technology-reported product revenues of $146,000, 
an increase of 535 percent when compared to revenues of $23,000 for the same 
period in 2000. Granted, the company absorbed a net loss for 1Q 2001 of $2.4 
million, as compared with a net loss of $664,000 for 1Q 2000. However, 
Evergreen remains pleased by its most recent financial performance, which it 
attributes to geographic diversification and growing market opportunities for 
solar power.  

The company's sales since 1997 have been composed primarily of solar panels. 
Evergreen plans to begin large-scale manufacturing of its solar power 
products in a new manufacturing facility this year. Evergreen's principal 
objective is to become a leading producer of high-quality solar power 
products, primarily for the on-grid market and the off-grid rural 
electrification market. What makes the company unique, according to 
Evergreen, is its String Ribbon technology, which reportedly avoids the 
slicing of a solid block of silicon, which is required for most solar-power 
technologies. Evergreen's String Ribbon technology reportedly cuts the use of 
silicon in half, which reduces manufacturing costs without impairing product 
reliability. 

As noted, AstroPower-which develops, manufacturers and markets PV solar 
cells, modules, panels, and systems-also reported a strong first quarter. 
Total revenues for AstroPower were $14,304,000, an increase of 37.5 percent 
from 1Q 2000. Product revenues were $13,581,000, an increase of 40.4 percent 
from the same period in the previous year. AstroPower is reporting continued 
strong performance for the company, and in fact has stated that it has far 
more sales opportunities than it can supply. 

There are other companies besides the two I've mentioned that are actively 
involved in solar power (for instance, Amonix, BP Solar and United Solar, to 
name a few). However, the suddenly strong performance of both Evergreen Solar 
and Active Power-after previous quarters, and even decades, of financial 
losses-indicates that market opportunities have opened up considerably for 
companies involved in solar power development and marketing.  

So, what explains the sudden resurgence of solar power, which last 
experienced any significantly widespread interest in the late 1970s? I think 
there are several factors driving this renewed interest. The California 
impact is obvious, as the state's energy crisis has shaken many Americans 
into a new awareness about a national energy crisis. However, I think the 
explanation goes deeper than that. In addition to the California impact, 
natural-gas prices are now at such a high level that alternatives such as 
solar power, which were previously perceived as cost prohibitive, now are 
becoming cost-competitive. 

In addition, many states and the federal government are providing tax 
incentives for businesses that employ solar electric systems, which is making 
solar panels appealing to a mass market. California reportedly pays one-half 
of the costs associated with a solar electric system that a business 
establishes; Illinois and Maryland are implementing similar credits. The 
federal government also provides a 10-percent commercial solar tax credit to 
businesses that employ a solar system, and those businesses are also eligible 
for a five-year, accelerated depreciated tax reduction. Personal energy 
credits related to solar power were repealed in the early 1980s, but some 
states like California are implementing "net metering" policies that make it 
easier for residential customers to install renewables-based generation 
(solar and wind) at their homes. In any case, solar power is becoming more 
financially feasible for businesses, which is an important factor considering 
that most solar systems still cost between $5,000 and $20,000. 

However, despite this renewed interest and projected growth, the American 
public as a whole is still rather leery about solar power. This is a sharp 
contrast to foreign countries, especially where interconnecting to power 
grids is cumbersome. In fact, more than three-quarters of the photovoltaic 
cells produced in the United States are sold abroad, and foreign production 
of solar panels internationally has increased 39 percent while U.S. 
production has increased by 29 percent.  

There are several reasons driving the general reluctance toward this 
alternative form of power in this country. First, many still believe that 
solar power is not (and will not become) competitive with more conventional 
sources of electricity, such as natural gas or coal. As has been often 
repeated, although the sun is free the devices used to capture it are 
expensive. This has kept many end-users, utilities and independent power 
producers tied to their more traditional fuel sources. Another reason is that 
many homeowners and building associations across the country are not 
receptive to solar power, which serves as a deterrent for potential customers 
that may want to use the sun to power new projects. A third reason is that, 
in most areas of the country, the sun (like the wind) is an intermittent fuel 
source, and battery systems that are often expensive must be used to store 
the power from the sun. 

The other drawback to solar power is the lack of priority it has received 
from the Bush administration. In April, President Bush proposed cutting more 
than $200 million from the federal renewable energy and efficiency research 
programs, which support funding for solar power and other renewable projects. 
The budget will still provide about $186 million to solar, wind and other 
renewable projects (down from current spending levels of $376 million). 
However, the cuts have been perceived by many as a lack of support for 
renewable projects by the new administration. In fairness to President Bush, 
his energy task force, which is scheduled to release its energy plan this 
week, has a potential energy crisis to solve and is focused on immediate 
solutions. 

Nevertheless, apart from the Bush administration's energy plan, by all 
appearances solar power appears to be on the brink of new market interest. 
How extensive this renewed interest will become, and to what extent solar 
power will emerge as a viable power source alternative across the national 
mass market, remain to be seen. Also, as noted in the report from Reuters, 
investors may be demonstrating only temporary interest in solar power, in 
anticipation of ongoing power shortages this summer. However, given the high 
prices of natural gas, concerns about emissions from coal and ongoing public 
resistance to nuclear energy, more than any other time in the last two 
decades solar power's future looks pretty bright. 

An archive list of previous IssueAlerts is available at
www.scientech.com


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