Here's Deutsche Bank's latest comments on the state of the global solar market:
“We see the sector transitioning from subsidized to sustainable markets in 2014.”
That's a bold statement, and one that's sure to agitate solar haters.
But that's not our concern. Our concern is simply when it will be safe to jump back into the solar game.
According to analysts at Deutsche Bank, margins will rebound and profitability will return in the second half of this year. This is something we've been saying, too — although I suspect it'll be more towards the end of the second half of the year before we see enough consistency in production numbers to let the bulls back out of the pen.
In the meantime, I find Deutsche Bank's call on subsidies quite interesting. Because quite frankly, if they're right...
This Changes Everything
Deutsche Bank recently raised its 2013 global solar demand forecast to 30 gigawatts. This represents a year-over-year increase of 20%. Analysts say much of this will come as a result of strong demand in the United States, China, Germany, and India.
Interestingly, India's Ministry of New & Renewable Energy recently said India increased its renewable energy capacity by 12.4 gigawatts in the past three years, taking its total up to 26 gigawatts. This puts the Asian nation just four gigawatts shy of its 2017 goal of generating 30 gigawatts of power from renewables.
Of course, this should come as no surprise, as India is desperate to integrate more non-coal-fired power generation due to pollution issues and supply shortfalls.
As I mentioned last year, it's becoming increasingly difficult for India to secure coal supplies. The Economist actually reported that by 2017, domestic coal production in India will meet only 73% of demand. The country's already spent $7 billion over the past six years acquiring outside coal pits in Australia and Africa.
India is in dire need of expanding its power portfolio to include less-pollutive sources, too. Last year, India was ranked as having the world's unhealthiest air pollution, according to a Yale study.
It's also worth noting that in India, solar has already reached grid parity — and that's with the high cost of capital.
That, my friends, is likely the main reason you're going to see the Indian solar market grow significantly over the next decade.
Clearly this is enough to make the folks over at Deutsche Bank quite bullish on India solar expansion. And Deutsche Bank isn't the only major player warming up to solar...
A Mainstream Source of Power
Earlier this year, analysts at investment bank UBS put out the following statement:
Solar has turned from a heavily-subsidized marginal technology into a mainstream source of power generation. Thanks to significant cost reductions and rising retail tariffs, households and commercial users are set to install solar systems to reduce electricity bills — without any subsidies.
UBS analysts have estimated there could be 80 gigawatts of unsubsidized solar installed in Germany alone.
Of course, Germany has been the leading catalyst for global solar growth for more than a decade now, thanks to an aggressive feed-in tariff scheme.
Today, Germans get about 25% of their power from renewables. In fact, thanks to a strong solar contribution, solar power now regularly provides significant power to meet peak demand.
Check it out:
This kind of diversification offers an enormous amount of flexibility, particularly during the summer months.
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Coming Around the Bend
So, what does all this mean?
Well, for consumers it means that for the foreseeable future, the price of solar installations will continue to fall, making it more affordable for folks to generate cleaner, domestically-sourced power without relying solely on the grid.
For investors, it means we're coming around the bend on solar's dark days — and by the end of the year, it could be safe to jump back in these waters.
The major cell and panel manufacturers will be the most obvious route to take, but we're also staying diversified with solar technology plays.
In fact, my colleague Nick Hodge is very bullish on one little solar tech firm that boasts a unique technology with the potential to make solar cheaper than coal — while doubling power output.
Although this may not be the most mainstream way to play solar, it could prove to be the smartest...
And let's face it; that's all that matters.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the managing editor of Energy and Capital and contributing analyst for the Energy Investor, an independent investment research service focusing primarily on stocks in the oil & gas, modern energy and infrastructure markets. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.
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