A Solar Company Doing More Harm Than Good

Travis Hoium, The Motley Fool
Updated

One of the great selling points of solar energy is that it's supposed to be good for the planet. It turns our most abundant energy resource, the sun, into electrical power that can replace coal, natural gas, and nuclear plants that are harmful to the environment. So when it was announced that JinkoSolar (NYS: JKS) was closing one of its plants because of toxic chemicals that were ending up in a local river, it was two steps back for the solar industry.

According to reports, hundreds of people have been protesting outside Jinko's factory, protesting waste disposal practices that have led to fish dying in a nearby river. China has never been known for being an environmentally conscious country in the past, with 60 Minutes and others highlighting less-than-friendly practices in the country for years. But solar manufacturers should be held to a higher standard because the environment is supposed to be their selling point.

That's why the fallout has spread far beyond Jinko's business and hit Trina Solar (NYS: TSL) , LDK Solar (NYS: LDK) , and Suntech Power (NYS: STP) , which all fell more than 10% yesterday. Where there's smoke, there's often fire, and these Chinese manufacturers run the same environmental risks that JinkoSolar does.

Trend or outlier?
The good news is this is a one-time event, for now, that hasn't spread to other manufacturers. Just because one manufacturer is employing poor manufacturing practices, doesn't mean the rest of the industry is. And it's important to note that this contamination is coming from a lower tier supplier that would be more likely to cut corners in manufacturing. We haven't heard of the same problems at top-tier suppliers such as Trina, Suntech, and SunPower (NAS: SPWRA) .

To put this into a little bit of context, this isn't the first manufacturer or energy company to have an environmental slip-up. In the past, I've chronicled the widespread oil spills that happen regularly throughout the United States. So it's bad, there's no denying that, but that's why regulators are important.

This black eye hurts
The news of JinkoSolar's environmental contamination only solidified my assertion that investors should stick to top-tier U.S.-based companies First Solar (NAS: FSLR) and SunPower. They aren't immune to the same problems, but Chinese manufacturers are much more likely to leave investors holding the bag at the end of the day.

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At the time thisarticle was published Fool contributor Travis Hoium owns shares of First Solar, SunPower, and LDK Solar. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.The Motley Fool owns shares of First Solar. Motley Fool newsletter services have recommended buying shares of First Solar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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