The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (Trefis) -- The global solar market jumped by 40% in 2011, despite subsidy cuts in several major markets. According to industry research firm Solarbuzz, installations jumped to about 27.4 GW last year, driven by new production capacity and price cuts. Industry revenue increased by 12% in the same year, a result of lower prices (and margins) for equipment manufacturers like SunPower (SPWR) and Trina Solar (TSL).
European demand continued to drive the market, with the region accounting for 68% of global capacity. However, the top two markets -- Germany and Italy -- have announced large cuts this year to curtail additional installations, which could hurt demand going ahead in 2012.
We have a $12.74 price estimate for SunPower, which is at a 60% premium to its current market price.Click here for our full analysis of SunPower.
Major MarketsThree of the top five markets for solar equipment were from the European Union. Market leader Germany and other countries have announced sharp cuts in subsidy support to solar electricity to curtail capacity additions. Germany installed close to 7.5 GW of solar capacity in 2011, more than double the government's target for the year. Installations have risen despite cuts because of a sharp drop in equipment prices, which has hurt panel manufacturers like SunPower. The German government is, therefore, looking to revise subsidies every month to better control solar installations going ahead. Other countries in Europe are also taking similar steps, pushed by the need to tighten budget deficits. Industry participants hope that falling demand from Europe could be replaced by sales in growing markets such as the U.S., China and India. China became the third largest market for solar equipment in 2011 and is expected to grow even further this year. Higher installations in China could help reduce the impact of the overcapacity situation that is troubling SunPower and other panel manufacturers, by pulling down prices and margins.
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