The relative strong performance of Sunpower’s stock can be explained by its takeover by France-based Total earlier this year.
The other Top 10-listed companies have another position in the industry supply chain: from polysilicon producers to inverter manufacturers; and from equipment manufacturers to project developers.
Why Are Solar Stocks Down?
Germany, the world’s biggest PV market in 2010, reduced its incentives for solar energy at the beginning of 2011. The same happened in the case of the runner-up, Italy. At the same time, an industry boom occurred in the supply chain. Not only did existing manufacturers of polysilicon, cells and modules in (mainly) China expand their production capacity, but the global market grew for at least ten consecutive years, showing an extremely high growth rate of over 100% in 2010. This spurred on the industry – and still today new, highly ambitious players are entering the market. The result of this is price and margin pressure, which necessitates cost reductions. In this game of survival, short-term profit prognoses and stock valuations are under pressure too.
A Bright Future in the Long Term
The good point about this cost and price pressure situation is of course that solar PV modules and systems become cheaper, faster. This will lead to solar energy fast becoming a competitor to fossil energy without the need for subsidies, called grid parity. As a result, and with the further cost and price reductions ahead, the future for solar energy is bright and infinite. This transition phase of solar becoming cost-competitive is happening right now, with the result that solar stocks today are attractively priced. More and more markets are emerging and will become cost-competitive. The global solar PV market will not stop growing. It is just transitioning from dependence of a few subsidized markets towards many markets and reaching the point of grid parity. Apart from this upside, the downside risk is that, amidst the fierce competition, not all manufacturers and players will survive.
What is the Outlook for 2012?
Economic uncertainty and government budget cuts put pressure on the continuation of incentive programs. This could result in further pressure on the industry, calling for increased and faster cost and price reductions. At the same time, an increasing number of markets will emerge, attracted by the cheap sustainable energy solution which solar energy offers. Which of these two developments will ‘win’ in 2012 is yet to be seen. Most experts are forecast that 2013 and the years thereafter will be extremely prosperous. The question therefore is whether stocks are now at the bottom price or whether they could drop a little more before going up, following the unavoidable infinite growth phase after 2013. As in any industry, even in the prosperous solar industry not all stocks are sure winners. Indeed, this is a sign that the solar energy industry is growing into a mature business.
Questions around how the markets in leading countries will continue to grow and how this will impact the global PV market are key topics at the upcoming Global Demand Forum , a Solarplaza Conference with leading experts and market analysts, taking place in Hamburg on 5th September.