Investors are banking on fresh government incentives in the United States and China to help pull the solar sector out of its slump, but it will be next year before demand from those markets even begins to make a dent in the global glut of solar panels.
Washington and Beijing have both rolled out programs this year aimed at stimulating their fledgling solar power industries and, in turn, boosting growth in their economies.
That promise of a spike in solar demand from both the biggest and third biggest economies has fueled optimism among solar investors, but the market for solar panels is still mired in a deep oversupply and financing for renewable energy projects has yet to rebound from the financial crisis.
"The solar environment remains difficult and an oversupply of modules is likely to continue despite increased incentives in the market, which won't likely stimulate demand until maybe the latter part of this year or early next year," HSBC analyst Christine Wang said in an interview.
Shares of Chinese solar companies including Suntech Power Holdings Co Ltd, Yingli Green Energy Holding Co Ltd, JA Solar Holdings Co Ltd and LDK Solar Co Ltd have risen 90 percent or more since the Chinese government in late March announced a solar incentive program that was followed by a second, larger program in July.
Meanwhile, U.S. solar companies SunPower Corp, First Solar Inc and Energy Conversion Devices Inc are trading up 67 percent, 50 percent, and 24 percent, respectively, from their 2009 lows.
The United States and China are expected to drive the building of at least 5 gigawatts (GW) of new solar installations between 2009 and 2011, according to a report by CLSA analyst Charles Yonts.
Even with new incentives, Germany will remain the world's biggest solar market until 2013, when the U.S. is forecast to equal Germany, with China slightly behind, according to emerging technologies research firm Lux Research.
In addition, analysts say the Chinese and U.S. programs may not even start to alleviate the oversupply of solar panels until late next year, while equilibrium between supply and demand is still three years away.
"China and a resurgent U.S. market will still not be sufficient to bring demand up to capacity before 2012," CLSA analyst Charles Yonts said.
MASSIVE GLUT
The solar sector is suffering from a massive oversupply of panels after governments such as Spain pared back incentives and the credit crunch dried up funding for new projects.
Nevertheless, solar module demand will grow 76 percent to 10.5 GW globally next year with the U.S. contributing 1.5 GW and China 0.5 GW, a UBS report said.
Still, the bank anticipates 5.2 GW of polysilicon oversupply, and nearly double that for modules.
That glut has halved solar module prices since January, while prices of the industry's key raw material, polysilicon, stand at $65 a kilogram after peaking at around $500 last year
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