In 1977, a young, shaggy and idealistic Loose Cannon hitchhiked across the United States to the leafy Appalachian backwater of Louisa, Virginia. There he found the 'intentional community' of Twin Oaks, a commune peopled by dissident academics, feminists and assorted ex-hippies experimenting with alternative energy, 'bio-regionalist' economics and zero-impact industry. After showing Loose Cannon the water-free composting toilet under her hand-hewn cabin, a former physics professor and Twin Oaks elder told him: 'Western civilisation has become a society of squanderers, addicted to fossil fuels. We'll burn them till they run out, the Earth's atmosphere boils away, or both. I want no part of this.' On the roof of her humble structure were four six-by-three foot photovoltaic panels. Each was rated to produce a maximum of 40 watts of direct current at 24 volts. In the rainy foothills to the Blue Ridge Mountains, the real output was closer to 10 watts, a meagre meal for the bank of lead-acid car batteries rigged in the loft. All told, on a good day, the good professor could reliably operate a handful of light bulbs and a weak fan. Solar power has come a long way since 1977. After tens of billions of dollars in private and public investment, solar technology has advanced to the point where - provided one lives in sunny climes - a US$25,000 rooftop installation can generate enough electricity to power seven 30-watt fluorescent bulbs, an energy-saving 500-watt refrigerator and a couple of televisions. Within a few years, industry insiders say, the practical power output from such installations could double, providing almost enough juice to cool and light a typical European household. And with oil prices crashing through US$60 a barrel this year, many investors are keen to place bets on alternative energy stocks. After all, even a supplementary small slice of the global energy market is vastly lucrative in absolute terms, and solar power revenues are bounding ahead by 40 per cent annually. Investors, however, would do well to remember the fuel-cell stock boom of the late 1990s. Fuel cells - which generate electricity and water using hydrogen drawn through a polarised catalytic membrane - are complicated, fickle and expensive contraptions that have been around for over a century. Nonetheless, dozens of small start-ups solicited hundreds of millions of dollars from socially conscious investors on the false premise that fuel cells were 'here, now'. After spending three or four years mimicking research and development operations to legitimise the ruse, most disappeared without a trace. Loose Cannon was reminded of the fuel-cell hysteria by a recent press release from Hong Kong penny stock Rexcapital International Holdings, which will soon be seeking shareholder approval for the acquisition of 51 per cent of US company Terra Solar Group. Terra Solar, Rexcapital claims, 'controls the leading photovoltaic technology and manufacturing knowhow ... deployed both in the US and internationally'. Wow! A bargain at only $123,373,750. Rexcapital itself, which this week posted an annual loss for last year of $376 million, only plans to pony up $24 million in cash. The rest will be paid for with 600 million new shares valued at $0.165 a piece. Too bad the claims about Terra Solar are all juiced up. The US firm, in fact, is the latest in a series of small, unprofitable solar power start-ups set up over three decades by Hungarian-born inventor Dr Zoltan Kiss. While the 73-year-old Dr Kiss is a passionate solar proponent and appears to have been involved in the early development of thin-film solar cells in the 1960s, his company neither owns nor controls the intellectual property behind the technology it sells. By Dr Kiss's own, perhaps optimistic, assessment, Terra Solar will sell just US$10 million worth of solar technology and knowhow this year - 0.1 per cent of a market valued at an estimated at US$7 billion. True, thin-film solar is cheaper than the prevailing crystalline technology used by large players such as Shell Solar, BP Solar, Spire Corp and Energy Conversion Devices. Thin-film technology only accounts for about 5 per cent of the global solar market now, and this could increase to 50 per cent by 2010, perhaps creating room for small companies like Terra Solar. But Rexcapital's hype should give investors pause. Tempting as it is to succumb to the Twin Oaks dream of cheap, consequence-free energy, the odds are stacked against start-ups like Terra Solar. A well-crafted panoply of promises is no substitute for old-fashioned critical reasoning and due diligence. richard.latker@scmp.com
