Alt-Energy Watch: US Solar Grows, But Not Fast Enough (FSLR, SPWRA, LDK, STP, JASO, TSL, TAN, KWT)

Solar PV makers had a good first quarter in the US. A report from GTM Research for the Solar Energy Industry Association concludes the US solar PV installation grew by 66% over the first quarter of 2010 to 252 megawatts.  That puts the US on a pace to install more than 1,000 megawatts of solar PV this year, up about 25% from last year’s total. The issue is whether this is going to make any difference for the solar PV industry.

Solar PV makers First Solar Inc. (NASDAQ: FSLR), SunPower Corp. (NASDAQ: SPWRA), LDK Solar Co., Ltd. (NYSE: LDK), Suntech Power Holdings Co. Ltd. (NYSE: STP), JA Solar Holdings Co., Ltd. (NASDAQ: JASO), and Trina Solar Ltd. (NYSE: TSL) need some good news. Since the beginning of the year, all these stocks have lost value, with the single of exception of SunPower, which is riding its change of control to Total SA (NYSE: TOT).

The sector has been hit with rapidly expanding capacity and falling government incentives, a deadly combination for an industry that has enjoyed relatively high margins for years due to a shortage of capacity and generous subsidies. Solar PV capacity is expected to grow by more than 100% in 2011, to somewhere around 40,000 megawatts. At the end of this year, capacity is expected to outstrip demand by about 30%.

That means falling prices. Combine that with falling subsidies in Germany and Italy, and the outlook for solar PV has dimmed considerably. Recent announcements by both Germany and Italy that no new nuclear plants will be built in either country, and that Germany will in fact de-commission all its nukes by 2022, have put a little enthusiasm back in the sector. But it’s not enough to turn things around and a big boost in US installations won’t make much difference either.

Germany added 7,000 megawatts of solar PV in 2010, but that total is expected to drop to 5,00-6,000 megawatts in 2011. Italy has capped new installations at 8,000 megawatts. A jump of 250 megawatts annually in the US is not a game-changer.

It’s also worth noting that US solar PV installations topped 360 megawatts in the fourth quarter of 2010. The 252 megawatts installed in the first quarter represents a sequential drop of -30%. Not so hot.

Share prices are reacting positively to the news this morning though. Shares of First Solar are up more than 0.6%, to $117.55, in a 52-week range of $111.40-$175.45. Low-cost maker crystalline solar PV maker JA Solar is up around 1.5%, to $5.33, in a 52-week range of $4.48-$10.24. Trina Solar, another low-cost maker, is up more than 2.6%, to $20.31, in a 52-week range of $17.00-$31.89. The Guggenheim Solar ETF (NYSE: TAN) is up about 0.75%, to $6.75, in a 52-week range of $6.40-$9.34 and the Market Vectors Solar Energy ETF (NYSE: KWT) is up about 1.5%, to $10.16, in a 52-week range of $9.60-$14.33.

Paul Ausick