The recession wasn't kind to alternative energy—and none felt the pinch as much as the beleaguered solar power industry. The credit crunch really hit the industry hard, killing installation projects around the world and shrinking demand for solar panels. Solar companies watched their stock prices bottom out with the rest of the market—only to keep on falling.
Just look at the recent performance of the S&P 500 vs. the two solar ETFs, the Claymore/MAC Global Solar Energy Index ETF (NYSE Arca:TAN) and the Market Vectors Solar ETF (NYSE Arca:KWT):
Yikes.
Funding issues, in part, kept solar low, even as the market started to recover. Projects rely on financing and, in many countries, government incentives, but as the recession hit, that easy financing and generous incentives dried up. (It didn't help that oil prices also plummeted, bottoming out below $35/barrel, which caused solar to lose much of its competitive allure.)
Take Spain, for example. Prior to 2009, Spain offered such generous subsidies for solar power installations that some analysts estimate almost 40% of the world's solar modules went to Spain. But by the end of 2008, the Spanish government decided it could no longer fund solar power to that level and cut back drastically on the money available. Consequently, demand sunk, and solar panel inventories around the world swelled.
Naturally, prices have dropped, too. Terry Wang, CFO of Trina Solar Limited (NYSE:TSL) told Reuters during last week's Global Climate and Alternative Energy summit:
"Selling prices (for solar panels) have dropped quarter over quarter at a rate of between ten to twenty-five percent for each quarter."
And it's not over yet. As Mr. Wang continued, "We see the trend, and it's going to continue for the second half of this year at least."
It's not all bad news, though. Mr. Wang and others in the industry expect the price decreases to slow during the first half of 2010 and then stabilize in the second half of the year. Adding to the good news, UBS also forecasts that global solar module demand may grow a whopping 76% next year to 10.5 gigawatts, as credit begins to flow again.
