Market conditions

Solar Stocks Down Then Up; Obama Calls For Energy Aid

President Obama talked up the promise of alternative energy in his State of the Union speech Tuesday, and said he'd clear the way to produce clean power on public lands.

 

But whatever their future, the solar and wind industries — and alternative energy investors — have had it rough lately.

 

[caption id="attachment_9559" align="aligncenter" width="345" caption="Solar and wind energy got good play in Tuesday's State of the Union by President Obama, whose tie blew in the breeze when he spoke at Florida Power & Light's DeSoto Next Generation Solar Energy Center in 2009."][/caption]

 

Subsidy cuts around the world have hurt profits, and analysts see a fierce global price war cutting the number of solar material suppliers.

 

For months, IBD's 24-company Energy-Solar industry group has ranked dead last in long-term stock performance among 197 groups tracked. It's down 60% over the past 52 weeks. But so far this year, those stocks have risen 38% vs. the S&P 500 index's 5% gain. Several are foreign ADRs, and China leads in making silicon solar products — the main type — at low prices.

 

"I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here," Obama said in his speech, as he talked about ending subsidies for oil and broadening incentives for an alternative energy industry "that's never been more promising."

 

Demand And Perks Seesaw

 

Jefferies analyst Jesse Pichel says solar stocks' good start to the year stems from stronger demand in big-market Germany's fourth quarter.

 

"But it's a double-edged sword," he said. "Germany coming back to life in terms of demand means the German government will look to lower subsidies."

 

The country's environment minister is already pushing to move up incentive cuts to the spring, according to a Reuters report Wednesday. That could spur demand — but only in the short run, as projects rush to beat the deadline.

 

Shares of the 10 biggest solar companies IBD tracks dipped or stayed flat early this week. But nine rose Thursday, and each is up strongly for the month, from ReneSola's (SOL) 52% gain and Suntech Power Holdings' (STP) 47% jump down to SunPower's (SPWR) 10% rise. The largest, First Solar (FSLR), lifted 21%.

 

Pichel says the European solar market is in decline but that will be mitigated by China, Japan and U.S. growth. Overall he says the year is shaping up to be "kind of flattish, still dominated by oversupply."

 

Until the solar and wind industries can thrive broadly without subsidies, changes in perks will affect demand and viability.

 

"The biggest issue on the federal side is financing and especially extension of the 1603 program," said Rhone Resch, president of the Solar Energy Industries Association. "It expired on Dec. 31 and, unfortunately, this program has done more to expand use of renewable energy than any other in history."

<<pre next>>