Global Offset Experts: Another tough year lies ahead for solar stocks.

Jan. 13, 2011 - PRLog -- Global Offset Experts research has indicated that while 2010 saw the largest ever sales year for the solar industry, shares for solar panel manufacturers lagged the broader market significantly.

2010 saw a 5.3% fall for the WilderHill Clean Energy Index, a bourse which includes solar and wind and other alternative-energy stocks compared to a 12.8% rise for the S&P’s 500 index as a result of investor fears that a pull back in government incentives for solar power would dampen demand as manufacturers boost production.

Going into 2011, those fears are now coming home to roost. Germany, the world’s largest solar market is again preparing to cut its solar subsidies, while increasing supplies of photovoltaic panels are predicted to outstrip demand thereby putting pressure on prices and producers’ profits.

The weaker euro only worsens the outlook for Chinese and U.S. panel manufacturers who sell the majority of their products in the European market.

"The sector faces a lot of risks," Sam Dubinsky, an analyst at Wells Fargo Securities told Global Offset Experts recently. "Multiples should probably stay low for the group in 2011."

According to Dubinsky, this year’s best bets are low-cost solar cell and panel producers such as China’s Yingli Green Energy Holding Co Ltd and Trina Solar Ltd. He goes on to predict that producers of the solar industry’s key raw material, polysilicon is likely to “still see a healthy supply-demand balance” this year.

Polysilicon producers include China’s Daqo New Energy Corp and LDK Solar Corp Ltd.

LDK recently issued a higher-than-expected fourth-quarter and 2011 revenue forecast, boosting its shares by around 20%.

Currently, the solar industry relies heavily on government subsidies as it remains cheaper to generate electricity from fossil fuels than from clean sources such as wind and sun.

Governments including Germany, the U.S. Spain and Japan have all been subsidizing clean energy as they seek to cut greenhouse gas emissions, but the resulting rapid growth in solar installations has also burdened them with additional costs at a time when the global economy remains uncertain.

Global Offset Experts research shows that last year, Germany, Spain, France, Italy and the Czech Republic all cut back on their solar subsidies. Further cuts are expected in 2011 from Germany and France in the first half of the year and in Italy in the second half. These three markets currently account for around 70% of the global market according to Bank of America Merrill Lynch data.

"People are generally concerned and worried about support levels for solar," Edward Guinness, co-manager of the London-based Guinness Alternative Energy Fund informed Global Offset Experts. "I look at that as a reasonably attractive time to invest. There's a huge scope for sentiment to improve."

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