Chart of the Day: Solar Surges, but Not for Investors
- Details
- Published on Friday, 15 June 2012 08:01
- Written by Adam English, Associate Editor, Inside Investing Daily
- Hits: 395
Solar may be a growing player in the energy market, but you should be wary of solar companies.
Led by strong growth in the commercial market segment, 506 megawatts were installed in the U.S. during the first quarter of 2012. The total for the year may reach 3,300 megawatts.
Rhone Resch, president and CEO of the Solar Energy Industries Association, stated: "Installations have grown by 85% in the last year... Americans are waking up to the realization that putting solar on your home or business is a better investment than the stock market."
Unfortunately, the return on investment for solar panels would, in many cases, beat the return from stocks in this sideways market. In particular, you'd be better off buying solar panels than investing in the companies that make the panels.
Get this. Prices for photovoltaic solar panels have fallen 49% over the past year, mostly due to overproduction from Chinese companies. That helped drive prices down across the board.
A new U.S. tariff on solar-power-generating equipment is in place, but the sector is still waiting to see how China retaliates. At the same time, though, domestic companies are unable to collect the U.S. Treasury grants they have depended on for years to remain competitive against conventional energy sources.
Essentially, solar-industry revenues have shrunk and there is vast uncertainty in the sector. As a result, the entire solar sector has shed value as investors have fled to safer pastures.
"We remain bullish in 2012 on all market segments in the U.S. and most of the 23 states we cover in this report," said ShayleKann, vice president at GTM Research. "However, 2013 is an open question... we expect the U.S. market to regain momentum thereafter and continue along its path to become a global PV market leader by 2015."
Bottom line... solar is a long-term gamble.