Will Black Silicon Light Up Your Solar Portfolio?

Sometimes the best scientific discoveries are made by accident. "We were doing research on the chemical reactions on metal surfaces and, on a hunch, I said let’s look at semiconductors, without a clear plan," said Eric Mazur, a physicist at Harvard University, about an experiment done in 1998. A decade later, it looks like his accidental discovery may revolutionize solar technology.

First, let’s get the science mumbo jumbo out of the way. Mazur’s research team fired short pulses of laser light at a piece of silicon wafer in the presence of the gas sulphur hexafluoride. The process blackened the silicon, and when he examined the surface under a microscope he found that it was covered in a forest of short spikes. Black silicon’s rough surface can absorb more light and can also trap a wider range of frequencies, including infra-red rays, that normally pass straight through standard silicon.

Mr. Mazur told The Guardian newspaper that photovoltaic cells using black silicon would significantly increase the efficiency of modern panels, the majority of which only convert around 8% of the energy falling on them into electricity. The very best convert around 20%. He said that a black silicon wafer could approach the theoretical limit of converting around 30%-40% of the energy falling on it into electricity.

The company created to commercialize his work, SiOnyx, last week announced the production of the first commercial-grade wafers. Is this a bullish development for solar stocks? Yes. Should you immediately go out and buy solar stocks? Not yet.

Almost everyone agrees that solar power has enormous potential, but the industry is being held back by the high cost of silicon wafers. Research teams have spent years looking for ways to bring down costs by improving the efficiency of solar cells, and black silicon may be the technology they’ve been waiting for.

But it looks like solar stocks have already priced in the development of such a revolutionary technology. The fact that solar stocks have failed to rally after SiOnyx’s announcement shows that investors may have anticipated such a development. Of course, solar stocks are being affected by external shocks, most notably the de-leveraging taking place on global stock markets. Plunging oil prices have also dragged on solar valuations.

As a long-term value investor, I would start looking to invest in some solar names over the coming weeks. Solar investors, who irresponsibly priced in a best-case scenario just a few months ago, are overreacting to the latest Wall Street chaos. Overreaction in the short term creates opportunities for long-term investors. New technologies like black silicon show that the long-term fundamentals for solar technology remain solid, but wait for the short-term chaos to play out before pulling the trigger.

Disclosure: I don’t own any solar stocks (yet)

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