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Solar stocks rise on surging German installs/China growth

Solar companies’ stock climbed this week on optimism that stronger-than-expected demand at the end of 2011 will continue this year.

The Bloomberg Global Leaders Solar Index of 37 companies headed for a fourth straight day of gains, advancing as much as 1.6 percent to $48.69 (£31)

Renewable Energy Corp. and Solarworld AG led the index with gains of 10 per cent each. The index has climbed 17 per cent after falling 59 percent in 2011.

Surging installation in Germany and the U.K. and China’s plans to double total capacity this year are driving demand for solar panels, said Aaron Chew, a Maxim Group LLC analyst in New York.

“I’m pretty bullish on demand in 2012,” Chew said in an interview. “If pricing remains the same, I see 30 gigawatts this year and 40 gigawatts next year” of new solar installations worldwide.

As much as 29 gigawatts of solar panels were expected to be installed worldwide last year, according to estimates from Bloomberg New Energy Finance.

Germany installed 3 gigawatts of solar panels in December, the most in a single month, the country’s grid regulator said Jan. 9, driving the world’s largest solar market to 7.5 gigawatts of capacity installed in 2011.

Conergy AG, which today said its chairman would become chief executive officer for this year to fill a position vacant since October 2010, gained as much as 8 percent in Frankfurt.

Meyer Burger Technology Ltd., Europe’s biggest solar-panel equipment maker, rose as much as 16 percent in Zurich, the biggest intraday gain in almost three years.

U.K. installations reached 761.9 megawatts last year, up more than 10-fold from 2010, according to the country’s energy regulator.

The head of China’s National Energy Administration Liu Tienan said Jan. 10 the country plans to double the amount of solar capacity in operation by installing 3 gigawatts this year.

The final number may be even higher, Chew predicted. “I think China does north of 5 gigawatts this year with some people saying it will reach close to 7.”

 “It may feel like a bottom in solar stocks,” said Paul Clegg, an analyst at Mizuho Securities USA in New York.

Inventory levels at solar companies are now at “record low levels,” Vishal Shah, an analyst with Deutsche Bank AG, said in a research note.

That may “create a sense of rush,” boosting demand in the first half of this year.

Increasing demand may be shoring up the price of polysilicon, Mr  Shah said.

Low panel prices and slim profit margins will continue to hinder earnings at solar companies, Mr Chew said. “Higher shipments with zero margins are still zero margins.”

Prices for solar panels fell 51 per cent in 2011 to 88 cents a watt as manufacturers increased production, according to data compiled by Bloomberg.

The gains in solar shares this week “may be more of a short-covering rally than a long-term shift,” said Mr Clegg. “There’s still a lot of overcapacity that hasn’t been dealt with.”