Market Analysts Fear Solar Profits Will Drop Despite Recent Surges in Sales
Although solar energy companies reported strong sales the first quarter of 2010, analysts are predicting a downturn on future solar profit margins. The surge of 2009 sales was sparked in countries like Germany and Italy by federal programs offering healthy incentives for solar construction. But these government subsidies are ending this year, and this new growth will subsequently be curtailed. Western companies will now have to compete with low-priced solar products being mass produced in China.
China, however, is also worrying investors since much of their production of solar components had to be outsourced to meet their quotas. Theo O'Neill, an analyst for Wunderlich Securities, predicts that the average price of solar modules could drop twenty percent by the end of 2010 because "... there's too much supply ... panel prices are falling."
The Wilderhill Clean Energy Index, which is composed of green energy companies, has experienced a 5.3 percent drop, compared to a rise in the S&P 500, which has gained 9.2 percent. Market analysts are not predicting that the market will rebound fast enough to deal with the excess supply that has been generated as a result of subsidies.