Solar Demand 2014

There is little dispute amongst analysts and research agencies that solar demand should grow in the high double digits in 2014, but the range of forecast varies quite significantly. Some market research agencies are predicting a demand of ~42 GW for 2014 which will be around 20% growth from 2013, while others such as Yingli (YGE) are predicting a 50 GW target for 2014 which will mean almost 45% growth. One thing that we in Greenworldinvestor have learnt is that solar demand generally exceeds even the most optimistic forecast, given the rapid decline in solar energy costs. While solar panel prices have stabilized in the last 2-3 quarters, the growth has been rapid. The reason is that the reality of the low solar panel prices was slow in diffusing. Also the distribution channels for solar components globally were not strong enough to take advantage of the super low prices of solar modules. But now the selling channels have become more robust as most large countries have become >100 MW markets.

Also solar companies have increased in scale and have a global footprint. The relationship with the financial system has also become deeper which is crucial to drive the demand for solar energy. Solar energy requires high upfront cost which means that financial institutions have a big role to play in terms of financing. Even though subsidy has come down in most parts of the world, solar energy is growing at an unprecedented scale. Solar energy already accounts for the biggest source of new energy capacity in a lot of places. The world’s largest energy consumers China, Japan and USA have become the 3 largest markets. Others such as India, Brazil, and South Africa have also become very important market which makes sense given the falling price of solar and rising price of fossil fuels.

I think that the demand in 2014 will be more near 50 GW than 40 GW, as solar energy is increasingly pressuring other fuels in terms of costs. Non electricity demand for solar energy is also becoming a big driver. Agriculture, Lighting and other industries have started using increasing amounts of solar power for their energy requirements. This should be good for almost all solar energy stocks. Our favorites in the sector remain Renesola (SOL), SunEdison (SUNE), Sunpower (SPWR) and Jinko Solar (JKS).