NEW YORK (
are often cast as diametrically opposed solar stocks: Trina Solar's gains are First Solar's losses, more or less, as the low cost Asian crystalline silicon players led by Trina continue to chip away at First Solar market share and pricing advantage.
This typical solar sector rivalry -- and a large part of the thesis supporting many of the Chinese stocks -- was not in evidence on Monday, as both First Solar and Trina solar led gains in the solar sector.
Trina Solar ended the day up 5.5%, while First Solar was up just over 3%.
Both Trina Solar and First Solar were in the news on Monday, with a
Wall Street Journal
columnist recommending both stocks as a way to play alternative energy. The
columnist, Gregory Zuckerman, quoted a private wealth manager in recommending shares of both leading solar companies from China and the U.S.
Zuckerman may not have read the recent article in the
saying the worst for First Solar shares was still to come, though maybe there's nothing wrong with a healthy level of disagreement in the press over a stock, even in the same press. Short-term traders in solar probably don't mind it.
First Solar also benefited on Monday from a
Battle Road Research
upgrade, which placed a $150 price target on First Solar shares. Battle Road Research said the negative catalysts are in the past for the U.S. solar stock, and uncertainty related to the European subsidy reductions have largely been absorbed by solar stocks at this point.
The gains for the solar stocks on Monday was a reversal from Friday's heavy selling, when shares of
were downgraded by Morgan Stanley. The Morgan Stanley downgrade occurred only two days after
upped its first quarter shipment guidance, a news event that had led to a big solar rally.
Solar stocks had hit short-term highs the sector had not seen since January after the JA Solar upgrade on Wednesday, yet by Friday it seemed that some solar investors decided to book recent gains.
It all begs the question, while the positive and negative solar news events positioned so close together may provide convenience for short-term traders, the news may be no more than "window-dressing" for any investor interested in a longer-term outlook on solar.
In fact, it may not have been the JA Solar first quarter shipment guidance, or the Morgan Stanley Canadian Solar downgrade, or the First Solar upgrade, that was the big news in solar. There was arguably a much more important solar data point released on Friday, and a data point that stands out in stark contrast to the Battle Road Research comment that the impact of reduced feed-in tariffs in Germany have been largely absorbed by solar stocks.
On Friday, the Germany government released its latest official data on solar installations in Germany. The number from Germany for the month of December was eye-popping. There was more than 1.4 gigawatts of solar installed in Germany in December. Year-to-date through November, there had been 2.3 GW installed in Germany.
That's more than 1.4 GW in one month, and more than half the annual level of installations through November in the span of the subsequent 30 days. Any sign of a solar feeding frenzy can have an outsize impact on the political climate that is so important to continued support for solar. More than 1.4 GW of solar installed in one month in solar's biggest market -- and its most politically volatile market -- could be more important to the solar industry than any change in quarterly guidance or in an analyst recommendation.
You don't have to take our word for it. The solar industry has said so itself.
In fact, a few months back, when
wrote in an article that the installed solar in Germany would reach 4 GW by the end of 2009, some influential people in the solar industry cried foul. Photon editors were accused of providing a 4 GW estimate as part of a deliberate political lobbying effort to scare German politicians into taking the hardest possible line in FIT reductions.
It is true that the parent company of
has made some overly aggressive estimates for solar capacity in the past, but a fact is a fact: the December number released by Germany last week of 1.4 GW installed takes Germany installations in 2009 to a level of 3.8 GW. That's pretty close to the Photon estimate of 4 GW deemed by some in the solar industry "irresponsible" just a few months back.
As previously noted,
the solar outlook is highly sensitive to the changing political environment.
ongoing efforts to mitigate the current level, or at least the timeline, for one-time FIT cuts expected to be approved by Germany this spring. The 1.4 GW installed in Germany in December is unlikely to serve that purpose well.
At a larger level, if an installation rate of 4 GW is enough to spook German politicians -- as some in the solar industry suggested it would be in lambasting the Photon estimate that has turned out to be correct -- then the political fallout out in Germany may linger well beyond the current round of proposed cuts. Of course, no one can say that will be the case, at least not yet, but 2011 will be a year in which Germany completes a wholesale review of its feed-in tariff policy.
This means while there may have just been two solar rallies and a solar stock selloff within one week, the real questions is: Is any of the solar news worth noting, or is it all just window dressing when compared to a 1.4 GW level of installations in Germany?
Solar analyst Colin Rusch of ThinkEquity said that it was not clear yet how the German data point would impact trading strategies in solar, but it was hard to ignore an installation level of above 1.4 GW in one month.
FBR Capital Markets' analyst Mehdi Hosseini, admittedly bearish in his solar outlook, wrote in an email on Monday that there is a strong lobbying effort behind the scene to "talk down" the amount utilities are paying for solar generation in Germany.
"The lower the installation, the lower utilities are paying and thus NO need to reduce the FIT. I wish the industry was taking some of that energy and resource and dedicating it to make solar generation more affordable instead of 'window dressing.'"
One thing was clear with the latest German data: there was no window dressing that could cloak Photon's 4 GW forecast being correct. It was no longer a industry magazine's estimate. The 1.4 GW of solar installed in Germany in December was a number that came straight from the German government.
-- Reported by Eric Rosenbaum in New York.
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