What solar companies and solar company investors are really worried about is what Germany will do. After Spain cut their solar incentives drastically, Germany became the largest solar world market.
News from Germany, where PV companies and consumer lobby groups are meeting with government representatives, indicates that the negotiations are converging on moderate cuts which would largely be offset by manufacturing cost reductions. It is important to remember how important the solar photovoltaics industry is in Germany: they are not only the world’s largest market but they produce more than half the world’s solar panels, with local employment approaching 100,000. Politicians will be leery to kill this economically growing segment, even if the popular support is waning for expensive government subsidies.
In all likelihood, the German and European solar markets will continue to grow but at slower rates, due to reduced incentives, while China and the U.S. are the emerging solar markets with rising subsidies and mandated Renewable Portfolio Standards (which dictate how much of a utility’s power mix must come from renewables).
As we outlined in our earlier article “Picking Solar Energy Winners”, we are still very bullish for solar in general, with sector index investments like the Claymore/MAC Global Solar Energy ETF (TAN), but in particular for the few companies leading the cost/watt reductions, such as First Solar and Trina Solar (TSL), which will continue to thrive and profit in this environment, unlike many marginal manufacturers.
Disclosure: No positions