In the sci-fi film Sunshine, a spaceship’s crew goes insane after staring at the sun for too long. Those hoping for profits from solar power investments might also go mad. While healthy solar panel demand does catch the eye, prices have fallen more than a fifth during the past two years due to a glut of manufacturing capacity.
Solar installations should keep growing, another 40 per cent to 81.4 gigawatts before the end of the decade. Much of this expansion will come in the US, the second-largest solar market. One driver for panel demand there has been a federal investment tax credit for 30 per cent of the spend. Originally meant to end this year, a last-minute reprieve by Congress extended it for another three years — good news for panel makers.
Yet volumes will still need to grow faster than solar panel prices are falling. Forward valuations for companies in the New York Stock Exchange’s Solar index have compressed; the index’s price/earnings ratio has dropped nearly a third this year to 18 times, suggesting the market does not yet believe that prices will stop falling.