LITTLETON, Colo. ( TheStreet) -- Pressure has increased on solar stocks to quicken their pace in the race to grid parity. Still, it's anybody's guess as to when solar companies will reach P-Day. Might leaving the grid parity pack for an off-grid track be a viable solar strategy?

If so, there's only one publicly traded solar stock in the U.S. opting out of the grid parity race, at least for the next few years, Ascent Solar Technologies ( ASTI).

Ascent Solar announced earlier this week a deal with India's industrial conglomerate Kirloskar Integrated Technologies. With the deal, Ascent is not aiming to play catch up with the big solar guns, like First Solar ( FSLR).

U.S. solar stocks, from First Solar to SunPower ( SPWRA), Evergreen Solar ( ESLR) and Energy Conversion Devices ( ENER) have been under pressure in recent months for a variety of reasons: competition from Chinese competitors in an arguably oversupplied market and feed-in tariff cuts in Germany are a few.

U.S. solar company-specific issues are also ongoing. The lack of growth in the building integrated photovoltaic (BIPV) market has kept Energy Conversion from being able to executive in a niche where it could have success, while Evergreen Solar is still going through its manufacturing migration to China.

All solar companies are chasing some under-pressure or yet-to-develop opportunity in these tough times for solar stocks. Could cell phone users in rural India be a better short-term bet than betting on China's introduction of a national feed-in tariff to jumpstart slumping solar? That's Ascent Solar's plan.

Energy Conversion's manufacturing has been running at 25% of capacity due to weak demand. Meanwhile, the solar industry, as a whole, is forecasting company-by-company capacity in 2010 above 1 gigawatt (GW).

Nowhere is Ascent Solar going more against the solar grain than with its capacity forecast for 2010: 6 to 8 megawatts. That's the type of capacity forecast that the solar heavyweights like First Solar and SunPower mention in minor press releases as a drop-in-the-bucket kind of project win, and that Street analysts don't judge to be game-changers for an industry that is thinking in terms of annual gains measures in gigawatts.

Ascent Solar's chief strategy officer, Mohan Misra, is forthright in his view of the solar industry's short-term outlook, and specifically, for thin film players like Ascent. With it's 6 MW to 8 MW forecast for solar installed in 2010, Ascent doesn't plan on attempting a head-to-head battle with the rest of the solar industry.

"It will be a struggle for the next two to three years in thin film to create volume, and so what you do is the next best thing. You go after niche markets. You don't expand like crazy and run a plant at 25% of capacity," Misra said. "It will be tough for U.S. solar in the next few years, and it's tougher to compete without a niche strategy in an oversupplied market," the Ascent Solar strategy chief said.

Ascent's plan is to "live" off, off-grid in India for the interim, before the next phase of major capacity expansion will be possible. "If we attempted to follow the 'successful' path of solar companies, we could never compete with them. We would be over a cliff, whereas with India and the off-grid opportunity we have a first mover advantage. It's being ignored, but people will come to see it eventually. Remember, we are only talking about a 6 MW to 8MW market. We're not talking about being First Solar, and lots of people have a tough time understanding it," Misra said.

Case in point, when asked earlier this week about the Ascent Solar strategy to focus on off-grid in India, one analyst who covers the stock said that they couldn't even find the time to discuss the strategy with Ascent management this week after the solar company announced its major Indian partner.

Ascent is often compared to Energy Conversion -- whose success is dependent on a recovery in the BIPV market -- as both U.S. solar companies have lightweight thin film solar panels which are a good fit for the commercial rooftop market. Ascent Solar's Misra said that its plans to focus on the electronics integrated photovoltaic market (EIPV) in India off-grid, is a strategy that differentiates the firm, though the proof is yet to come. "It doesn't change the game in terms of immediate profitability, and investors have questions whether we can even do 6 MW to 8 MW of non-BIPV," Misra said.

A few analysts do, on the other hand, believe in the Ascent Solar strategy, or at least remain cautiously optimistic.

Raymond James co-managed a secondary offering for Ascent in October 2009, and Raymond James analyst Pavel Molchanov said that the strategy of focusing on off-grid, specialty products makes perfect sense for Ascent Solar and can be profitable.

The Raymond James analyst said that average sale prices are much higher in this niche (upwards of $5/watt, vs. less than $2/watt in traditional photovoltaic applications). The ASP edge can make up for the lower volumes, the Raymond James analyst argued.

"This is an instance of Ascent Solar trying to carve out a unique niche for itself. Remember, First Solar can't compete in the market for portable power, because its panels use a solid glass substrate, which is both heavy and fragile," Molchanov said. Ascent, by contrast, uses a flexible plastic substrate, making it better suited for portable applications.

Vijay Singh, director of research Janco Partners, said there were no other public solar companies taking the Ascent Solar approach. The alternative energy analyst said that given Ascent's production targets and EIPV ASPs, Janco is expecting Ascent to do about $10 million to $11 million a quarter in revenues in the back half of 2010.

The U.S. solar struggle evident in the stock price of all the U.S. solar players , such as First Solar and SunPower, is also apparent in the capital markets fortunes of Ascent Solar.

When Ascent Solar announced the deal in India this week, its stock price went from $3.26 to $4.09 in one day, a more than 20% pop for a very small stock. Evergreen Solar is still the lowest valued of the U.S. solar bunch, with a stock price of $1.19 on Thursday morning. Ascent was back down to $3.86 on Thursday morning, well off its 52-week high of $8.83 achieved in June 2009. When Ascent Solar completed a secondary offering in October 2009, the offering priced Ascent Solar shares at $6.50.

Ascent Solar's revenues have been $500,000 or less for the past four quarters and profitability remains elusive. The Janco Partners analyst conceded that investors will remain on the sidelines until proof surfaces. "Ascent's strategy will only attract interest from capital markets once the company can demonstrate some top line growth and the ability to sell products in EIPV market. We think the second half of 2010 is when we should start to see some proof of that."

"The differentiator is the applications to which the product lends itself. Insofar as that holds, the off-grid approach can be a short-term differentiator," Janco's Singh commented.

The applications that exist for solar in the electronic integrated photovoltaic market are a far cry from the large-scale solar farms or residential rooftop market that excite the interest of many solar stock investors. The biggest immediate area is related to cell phone use expansion in India. Communities are looking for charging solutions that don't rely on diesel power. Ascent Solar's Misra said India is adding 18 million to 20 million cell subscribers each month, and close to 500 million subscribers in the next three years.

The Ascent chief strategy officer also pointed to the global organization TERI, which has plans to develop solar lanterns for 200 million rural residents globally. While TERI is supported by large philanthropic organizations, Ascent's Misra was clear that its India strategy is no big-hearted push, but a potential profit-maker.

"We aren't donating anything. We are enabling applications that don't exist today, and that provides value. If telecom companies can add 18 million subscribers a month and sell phone plans to subscribers, we don't have to be at a high price to make it work," Misra said.

Kirloskar is active in India's telecom market. There are also applications in agriculture, for portable water-pumping power generation, an area in which Kirloskar is also active.

What's more, India's own solar companies, led by Moser Baer, have been more focused on exporting their solar as opposed to pentrating the Indian off-grid market. India has been in the photovoltaic market since 1992, all of the opportunity today is in off-grid. While the rooftop and grid markets will develop, the challenge in India today is off-grid.

Other solar companies may be willing to wait for the other markets in India to develop. Ultimately, if Ascent is successful in carving out a niche for itself in India's off-grid market, more or less a short-term survival strategy, it will have to return to the game of competing with the solar industry on the industry's larger terms.

The fact that Ascent Solar remains at an early manufacturing stage, allows the solar company to make the case that in this difficult environment for solar, it doesn't have to aggressively expand capacity and be forced to operate substantially under it. "Capital preservation is not a bad thing at the moment. However, in the end, scale is a big part of cost reduction and therefore, Ascent, like anyone else in the industry, will have to go down that path with the hope that the market demand recovers and catches up to the industry capacity," Janco's Singh said.

-- Reported by Eric Rosenbaum in New York.


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