The weak prices of social panels helped stimulate demand. In states like California and Hawaii, homeowners rushed to install roof-top panels that no longer seemed exorbitant.
Developers are building massive solar parks that can supply energy to electric utilities. The Chinese have embarked on a massive construction program that promised to soak up extra supplies of solar equipment.
"People have more confidence that the companies will move back to profitability," says Edward Guinness, portfolio manager of Guinness Atkinson Alternative Energy (GAAEX), a mutual fund.
Despite the improving demand, the picture for the stocks is mixed, says Treasa Ni Chonghaile, portfolio manager of Calvert Global Alternative Energy (CGAEX), a mutual fund that invests in wind and biofuels as well as solar.Although developers that build solar parks are reporting improving profits, manufacturers still face margin pressures. Ni Chonghaile now has 8% of her assets in solar, down from 15% a few years ago. "A lot of companies still have problems," she says. "We are only interested in quality businesses that are profitable or close to being profitable," she says. The Calvert fund owns Canadian Solar (CSIQ - Get Report), which makes solar equipment in China and develops parks in Canada and the U.S. Although the manufacturing business is struggling, the development operation is showing healthy profits, says Ni Chonghaile. Another holding is Advanced Energy Industries (AEIS), which makes equipment that is used to convert solar energy into electrical power. "This is a way to play the growth of installations in the U.S.," she says. Demand for solar power is soaring in Japan, says Edward Guinness. Japan shuttered nearly all its 50 nuclear plants after the Fukushima disaster. To compensate for the lost power, the country has embarked on a massive program to develop solar plants. Japan is expected to add 5 gigawatts of solar power this year, the equivalent of five nuclear power plants. That will create more sales for manufacturers. Guinness owns Trina Solar (TSL), a Chinese producer. "They are one of the low-cost producers in the world, and their balance sheet is not stretched," he says. At the time of publication, Luxenberg had no positions in securities mentioned. Follow @StanLuxenberg This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.