Solar is fundamental to our efforts to produce energy without destroying our environment. Despite this fact, some were unconvinced about solar's prospects in 2009.At the start of this year JPMorgan analyst Christopher Blansett indiicated that he expected solar prices to "fall and bottom out later in the year." Blansett further warned investors "not to expect a recovery in solar stocks in the event of a broader economic rebound in 2009" Blansett added that constrained credit markets could "bring the alternative energy industry to a screeching halt."
Although Blansett's dire warnings may not be entirely accurate, solar markets are not immune to this recession and they have been hit hard by the current economic situation. The solar sector is feeling the effects of the boom-bust cycle we've seen in the global economy and energy investment over the past two years has had a destabilizing effect.
Planned increases in solar power production, positive returns and promising innovations, give us reason to believe that solar stocks will perform well.
According to Yale 360, US Interior Secretary Ken Salazar said "his department is studying whether 670,000 acres of federal lands in six Western states are suitable for the construction of large-scale solar power projects." Salazar said this administration is doing “everything we can to put the bulls-eye on the development of solar energy on our public lands.” He further predicted that "by the end of next year, 13 commercial-scale solar power projects could be under construction on U.S. government lands in Nevada, Arizona, California, Colorado, New Mexico, and Utah."
With several new commercial scale solar facilities currently being built in Florida, the state is a good example of America's increased reliance on solar energy.
In Europe, Germany and Spain remain international solar leaders and in France, EDF Energies Nouvelles and US firm First Solar Inc (FSLR) recently announced they will build the country's largest solar panel manufacturing plant.
The Asian solar market offers cause for bullish optimism. Government investment will push Japanese demand for solar panels up for the first time since 2006 and make Japan much more attractive to foreign solar power investors.
The Japanese government recently announced that it will be infusing $9 billion dollars into the solar sector. This will increase Japan's solar energy market by 2000% over the next decade. On June 9, Prime Minister Taro Aso said that solar power (and electric cars) will play a key role in lifting Japan out of recession and encouraging robust growth. The PM foresees a cleantech industry worth 50 trillion yen (about $510 billion) by 2020. He wants solar power generators installed at roughly 37,000 public schools in the next three years. The total increase would boost Japanese solar production twenty fold by 2020.
Nowhere is solar performing better than in China. After lagging behind the industrial benchmark for months, shares of Chinese solar power firm, Suntech Power Holdings Co., Ltd. (STP) tripled the Dow in July. Chinese owned Canadian Solar (CSIQ) announced that it will target 12,000 kilowatts of yearly solar cell sales in Japan from its Chinese production base.
According to Lux Research, the future of solar power is bright. Although widespread grid parity will take a decade, in certain locations solar is already approximating competitiveness with traditional energy. This trend will continue with the introduction of innovative new measurement techniques.
“The solar industry is coming of age, and the metrics for judging solar technologies are shifting,” said Ted Sullivan, Senior Analyst at Lux Research, and lead author of the report. "This shift enables a more direct comparison to conventional generation types, and enables more rigorous analysis of solar technology on the basis of life-cycle costs, payback period, and return on investment. In subsidized markets, the internal rate of return can reach well in excess of 10%, actively fuelling demand.”
At the end of May SunPower (SPWRA, SPWRB) announced a major innovation, the latest version of the SunPower(R) 315 Solar Panel, the most powerful solar panel on the planet. It is interesting to note the parity between the stock performances of industry leaders SunPower and First Solar. Earlier in this downturn cost was trumping efficiency in the solar sector, now SunPower's superior efficiency is keeping pace with First Solar's low cost thin film panel.
The market for solar technologies is now more sophisticated and increasingly solar power is competing with traditional sources of electricity. Falling silicon prices (down from nearly $1.50 per pound to just above 50 cents) has helped to reduce costs for silcon reliant solar panel manufacturers. But the primary driver for solar energy production will continue to be the fact that it is carbon-free, uses no water and produces no waste.
Despite the recession and contrary to certain dire predictions, some solar firms are doing very well and as we recover the solar sector is destined to grow.
Next: Solar Stock Comparitive Market Performance
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