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What a Dark Year for Solar Stocks

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Many are glad to have shut the door on 2008. Few are likely to be happier than solar-power companies.

Of the six solar stocks valued at more than $500 million (a club that grew much smaller during 2008), none outperformed the S&P 500 index, which fell 38 percent last year. The stock that came closest to matching it was First Solar (s FSR), which lost 48 percent in 2008. First Solar’s low-cost thin-film technology kept profits growing, and kept the stock from falling further.

Behind First Solar came SunPower (s SPWR), which slid 72 percent. Yingli Green Energy (s YGE), Suntech Power (s STP), JA Solar (s JASO) and Evergreen Solar (s ESLR) all lost more than 80 percent this year, which is more than the Nasdaq fell from the frenzied peak of March 2000 to the rock bottom of October 2002 (a decline of 78 percent).

The declines are especially stark considering there was some positive news for solar companies that could have caused a rally in a normal year. Congress finally renewed a solar tax credit. VCs invested billions into solar startups. States like California and Massachusetts were leaning on utilities to use more solar power.

But this was not a normal year. Not only were solar stocks coming off surreal rallies in 2007, when all six stocks saw their share prices more than double, they were hit by several bearish forces in the closing months: a credit crunch restricting access to new capital, a collapse in oil prices, a severe drop in spending from homeowners and companies. All while a glut in solar modules threatened to trim prices.

In 2009, while access to capital might remain tight, the solar industry again has some things in its favor once the economy bottoms out. Polysilicon prices may fall as new factories boost production. Signs indicate that solar power is starting to be as cheap as grid electricity. Fiscal spending or new tax credits could spur buying of solar panels.

Ernst & Young’s Joseph Muscat suggested to the AP that the balance will shift from negatives to positives sometime this year.

“Right now the challenges in the economy are weighing more heavily than those incentive programs to try to keep the industry moving along at a good pace…. I do believe that the cleantech renewable energy sector will be the first to emerge when the market stabilizes.”

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