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Summary:

Solar companies have seen their stocks riding high so far this year. But that ride wont’ last forever. Here is a list of events and policies that could move the stocks in 2011.

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Solar companies have seen their stocks head up over the past two months as they’ve been reporting killer sales and profits for 2010 and remain bullish about 2011. Shares of key players, such as SunPower, Suntech Power, First Solar and Trina Solar, all have seen their shares rise about 30 percent or more since the beginning of the year.

But no stocks can keep climbing forever, and news events that have nothing to do with the companies or the industry could easily push the share back down. Key solar stocks – along with major tech stocks such as Apple (AAPL) and Google – all fell on Tuesday as the unrest in Libya, a major oil exporter, reversed a 3-week gain for the Dow Jones Industrial Average and hit the Nasdaq particularly hard. Despite a great earnings report from Trina Solar and JA Solar Tuesday, their stocks – along with the rest of the solar gang – also have been diving.

Here are events and policies that could move solar stocks up or down:

1). Solar in the old world: Talks about declining incentives in Germany, Italy, France and other parts of Europe have prompted solar companies to step up efforts to carve out new businesses elsewhere. But European countries remain significant territories, and Italy in particular has shone brightly in 2010 and will likely in 2011 as well. Both SunPower and Yingli Green Energy recently told investors that they expect Italy to remain a good place to be. But if Italy alters its policy significantly sooner than expected, you will see a big scramble by developers to install, followed by a slow down.

2). U.S. solar politics: The political battle has begun over federal spending on solar and other clean energy during the current and 2012 fiscal years. The Obama administration wants a budget boost; many Republicans and some Democrats say no way. Republicans in the House of Representatives already are threatening to shrink a loan guarantee program that has offered hefty sums to solar companies such as First Solar, SoloPower, Solyndra, BrightSource Energy, Abengoa Solar and Abound Solar. Plus, a popular grant program that covers 30 percent of a solar power project cost is set to sunset at the end of this year, so we will see another round of tug-of-war over its renewal.

3). Progress on big projects: The U.S. utility solar market is taking off with several large projects that are moving along in the final financing and permitting stages. Whether they can start construction and deliver power on time will be closely watched. Utilities and regulators have good reason to be concerned that these projects might not move along smoothly. Many of them are being developed by relative new comers to the power project business.

First Solar may be a long-time producer of solar panels, but it only got into project development business in recent years. The federal government recently offered the company a loan guarantee of $967 million to build a 290 MW project in Arizona. SunPower is working on a 250 MW project in California and hoping to get a federal loan guarantee for the project. Suntech Power, though not a project developer, recently won a big contract to provide 150 MW of solar panels to Sempra for a power plant in Arizona.

4) Don’t Forget China: Of course, how can anyone not think of China when it comes to cleantech investment? Most analysts believe China will be a key consumer market of solar electricity, though that won’t happen any time soon. Large project proposals are emerging. In its earnings release Tuesday, Trina Solar highlighted a 20 MW project it will be providing solar panels for in Jiangsu Province. Chinese companies, already some of the world’s biggest solar electric equipment exporters, will have an advantage on their home turf. But it will still have to compete with American, European and other Asian companies with money and influence to tackle the new territory. First Solar, for one, finally see progress in a 30MW project already delayed by government reviews.

5). And India and other emerging markets: It’s good to keep an eye on new markets and when large solar companies head there. Juwi Group, a large project developer from Germany that signed a 600 MW sales deal with MiaSole, has set up its office in India (it also recently set up operations in Chile and South Africa). First Solar, too, started announcing solar panel supply agreements in India over the last three months, including a 15 MW deal with ACME Tele Power and 25 MW with Moser Baer Clean Energy. Trina already can boast about a 5 MW project that’s been completed in the state of Gujarat and used its solar panels.

6). IPO market: The IPO market has slowly regained its appetite for cleantech, though how well it will embrace solar is hard to say. Solyndra canceled its IPO plan last June and JinkoSolar debuted on the New York Stock Exchange to a lukewarm reception in 2010. Some solar companies might try their luck this year, including MiaSole, a copper-indium-gallium-selenide thin film maker in Silicon Valley. Solar thermal power plant developer BrightSource Energy and microinverter developer Enphase Energy also could be IPO candidates. How well solar IPOs fare this year will set the tone and pace for others eyeing the public market.

7). Oil crisis: Typically, bad news about oil is good news for solar even though the two industries don’t have a direct relationship. Most of the electricity generated in the U.S. comes from coal- and natural gas power plants. But the idea is that solar, as a clean energy, is the antithesis of oil. The oil crisis in the 1970s certainly prompted the government and businesses to invest in solar. That’s the long-term view anyway. Volatility in oil-rich countries in the short term can drag solar stocks down while also pushing oil prices up. This will particularly ring true during an economic recovery, when investors are more skittish about events that could delay the recovery and prefer not to take a chance on more volatile stocks such as those in solar and other emerging cleantech sectors.

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  1. INDIA poses the excellent growth with right mix of good government subsidies and quick market adjustment by the local players. Though its tough for multinational players to make entry into INDIAN market because of regulations and local bubble type environment, when dust settles down, having bestowed with best DNI in place like Gujarat and Rajasthan, this market is certainly explode. There are many local players already dreaming IPO within next 3-4 years.

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