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First Solar Deals With China Delays

First Solar wants to build the biggest solar power plant in the world in China, but those plans have been held up by the continued delay of a national subsidy program.

NEW YORK (

TheStreet

) -- China represents one of the great hopes for the solar energy industry as it attempts to diversify away from Europe, but

First Solar

(FSLR) - Get First Solar, Inc. Report

indicated on Wednesday that the Chinese solar market remains problematic.

The U.S. solar bellwether continues to idle in its plans to build a 2 gigawatt solar power plant in China, which would be the world's largest. First Solar had expected to begin construction in June.

The need for solar energy companies to diversify away from Europe has become more pronounced as the sovereign debt crisis there and the deterioration of the euro continue to wreak short-term havoc on solar stocks.

The solar-energy sector derives a majority of of its sales in euros, and solar stocks collectively have fallen 30% in the past month, according to a figure released by investment and research firm Collins Stewart on Wednesday morning.

The European debt crisis has only exacerbated the problems of relying too much on lucrative European subsidies. For much of 2009 and into 2010, solar companies have talked about coming booms in China, India and the U.S., but the lack of national feed-in tariffs in China, and a comprehensive policy from the U.S. to support solar, have kept a lid on growth in these "next" major markets.

In China, the situation continues to be slow-developing, according to comments made by First Solar President Bruce Sohn on Wednesday in Shanghai. All previous guesses for when China would approve a feed-in tariff scheme have been wrong, which is part of the uncertain nature of a business dependent on government action.

Sohn told

Bloomberg

at a meeting in Shanghai on Wednesday that the Chinese government is expected to approve the feed-in tariffs later in the summer. The original contract that First Solar had with China called for a feed-in tariff rate to be set by the end of 2009, Sohn indicated.

"We're missing a key area: clarity about what the price per kilowatt hour will be," Sohn told

Bloomberg

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.

Sohn is in China as part of a U.S. trade mission and is meeting this week with Chinese officials to discuss solar tariff rates.

First Solar's share price has dropped by $40 to around $109 in the past three weeks -- after spiking higher by $28 after releasing earnings in late April -- with the European debt crisis dominating the trading sentiment in solar stocks.

Wednesday morning, First Solar shares opened lower by about 1% as the stocks across the sector again slid on fears that Europe's debt situation was worsening.

Ultimately, it's not just the euro's depreciation that will impact second-quarter earnings for solar companies -- and potentially continue to impact financial results for these outfits through 2011. The most important factor is the longer-term outlook for the solar sector's most important regions.

For the time being, though, nations like China and India are still more of a driver of hope than a real driver of solar sales.

-Reported by Eric Rosenbaum in New York.

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