With utilities adopting standards to increase the amount of solar-generated electricity in coming years, the U.S. could bolster its presence in the global solar-power market. The quickening growth pace could present attractive opportunities for investors, according to some professionals.
At the end of 2009, the U.S. ranked fourth in total solar capacity, with 2.09 gigawatts installed, behind Germany with 9.79Gw, Spain with 4.01Gw, and Japan with 2.68Gw, according to Bloomberg New Energy Finance. With U.S. installed capacity growing at a faster pace than that of the international market, the country may be on track to become a more dominant market by 2014, according to Larry Sherwood, an analyst at the Interstate Renewable Energy Council (IREC).
Some 23Gw of solar capacity are under development in the U.S., enough to provide electricity for 4.4 million households, according to the Solar Energy Industries Assn. (SEIA). Solar demand in the U.S. is expected to grow 75 percent in 2011, compared with 2010. About 1.5Gw to 2.0Gw of capacityâ??1.36Gw in California aloneâ??is scheduled to be installed next year.
One factor could snarl that time line: the expiration of federal incentives, specifically the Treasury Dept.'s cash grant program, which currently covers 30 percent of a project's costs, as long as construction has begun by the end of 2010. SEIA and other groups are pushing to have the qualifying construction start date extended by two years, to the end of 2012. Members of the U.S. Senate Finance Committee didn't return calls asking when they would vote on extending the program. Kaufman Brothers said in an Aug. 17 research note that the firm didn't expect a major decision on solar incentives until after the fall U.S. elections.
The diversion of $3.5 billion from the Energy Dept.'s Loan Guarantee Program to other stimulus projectsâ??and uncertainty as to whether any of the money will be restoredâ??is also delaying some projects. Indeed, the main reason the U.S. solar market lags Europe's is that the federal government has consistently failed to commit to a long-term policy offering financial incentives to power providers, without which solar can't yet compete with such cheaper sources of electric generation as coal and natural gas.
While Europe is moving toward smaller rooftop installation, utility-scale projects are fast becoming the focus in the U.S. and are the most likely way for the U.S. to catch up with the leading solar markets. Photovoltaic panel makers FirstSolar (FSLR) and SunPower (SPWRA) have large pipelines of utility-scale projects and will be dominant players in the U.S., starting in 2011, says Matthew Page, one of the managers of the Guinness Atkinson Alternative Energy Fund (GAAEX).
With so much uncertainty surrounding incentives at home and overseas, the fact that more countries are adopting renewable energy standards and planning to build solar plants has analysts and some fund managers feeling more confident about the industry. "I'm bullish on solar because the market is no longer dominated by two or three countries," says Jeff Osborne, an analyst who covers clean energy stocks at Stifel Nicolaus (SF). "Morocco said in 2009 that it wanted to build 2Gw of solar." Utilities in Eastern Europe, he adds, are eager to diversify their energy sources to reduce their exposure to periodic supply disruptions from Russia's Gazprom (OGZPY:US), which provides roughly 25 percent of Europe's natural gas needs.
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