If there’s any single word that defines the solar market for 2011, it is “uncertainty.” Policy changes in Germany, France, the Czech Republic, and elsewhere in Europe are expected to slow growth in solar installations. Italy, the US, China, India, Canada, and other, smaller markets will pick up some of the slack, but probably not enough to soak up all the manufacturing increases that are coming on line in the new year.

Photo-voltaic solar installations are expected to outsell large-scale solar thermal projects, as governments keep a careful eye on spending and incentives. We’ll look only at solar PV companies in this story because that’s where the large, publicly traded companies compete. The solar PV players we’ll look at are First Solar, Inc. (NASDAQ: FSLR), Suntech Power Holdings Co. Ltd. (NYSE: STP), LDK Solar Co. Inc. (NYSE: LDK), JA Solar Holdings Co. Ltd. (NASDAQ: JASO), Sunpower Corp. (NASDAQ: SPWRA), Energy Conversion Devices, Inc. (NASDAQ: ENER), and Trina Solar Ltd. (NYSE: TSL).

Here’s a short table showing the tickers, the current price, the mean target price from Thomson Reuters, the implied upside to that target, and the 52-week trading range. We’ll have some comments on these companies following the chart.

Stock	Current	Target	Implied Gain	52-week Range
FSLR	$131.09	$153.34	16.97%	98.71 – 153.30
STP	$7.84	$10.03	27.93%	7.05 – 18.78
LDK	$10.08	$12.62	25.20%	4.97 – 15.10
JASO	$6.87	$11.69	70.16%	4.22 – 10.24
SPWRA	$13.02	$15.56	19.51%	9.61 – 26.35
ENER	$4.55	$5.08	11.65%	3.76 – 12.75
TSL	$23.17	$34.68	49.68%	14.85 – 31.89

A quick glance at the chart shows that just two companies, JA Solar and Trina, are expected to trade above their current 52-week range. Only one other company, First Solar, is expected to match its 52-week high.

First Solar remains the low-cost leader of solar PV cells by virtue of its thin-film technology. As crystalline-based solar PV prices continue to fall, however, First Solar’s cost advantage shrinks because crystalline cells have a higher conversion rate of sunlight to electricity, and are thus more efficient. First Solar acquired a solar project pipeline company earlier this year and that will help it soak up some of its increased capacity. The big uncertainty for the company is its European business, which has been a good revenue generator but could slow significantly this year.

Suntech, like the other Chinese makers, benefits from virtually unlimited backing by the Chinese government. In 2010, China’s solar PV makers have been granted nearly $26 billion in government-backed loans to expand capacity. Suntech is using some if its wealth to open a manufacturing operation in the US, which is likely to magnify the company’s inefficient cost structure. Still, the US is expected to increase its solar PV installation by about 1,000 megawatts in 2011, so Suntech is probably hoping for some payback for creating new US jobs.

LDK Solar has boosted its manufacturing capacity to 3,000 megawatts, but capacity is no longer the choke point. There’s more than enough global capacity to meet demand. LDK, and the other Chinese companies, have so far not shown any inclination to acquire a project pipeline company, as First Solar and Sunpower have done. That could weigh on revenue and earnings, especially with falling prices due to over supply.

JA Solar’s story is a bit more complicated. Despite its potential upside, the company’s shares have reached their highest short interest position in more than a year, at nearly 20% of the company’s float. JA Solar has been the low cost leader among the Chinese makers, so the company is not likely to wring out more costs easily.

Sunpower, like so many other of the crystalline solar PV makers, needs to wring out costs. The company has the most efficient cell technology among the solar PV makers, and is expected to make a decision in 2011 about whether to build a new plant, probably in Asia. Like First Solar, Sunpower acquired a project pipeline business earlier this year, which will help it keep revenues coming in.

Energy Conversion Devices has watched its shares fall steadily from a 52-week high set in January 2010. The company has negative earnings for the past four quarters and losses are expected to continue through 2011.

Trina Solar is using some of its government-backed loans to expand its production capacity. The company is counting on US sales to make up for any losses in European revenue. Trina expects shipments to the US to double in 2011, to about 260 megawatts.

It seems very likely that no solar PV maker is likely to outshine all the others in 2011. If forced to choose, the companies with solid project pipeline groups would get my vote. Those are First Solar and Sunpower. Every other company will be competing on price, which leads to steadily declining margin, and often feels like a race to zero.

The PowerShares WilderHill Clean Energy ETF (NYSE: PBW) and the Guggenheim Solar ETF (NYSE: TAN) are both down for 2010, with the Guggenheim Solar fund off nearly 30%. On the upside, both set new 52-week lows in June and have improved more than 10% since then.

Paul Ausick

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