Factory Expansion
"We had all this capacity added right ahead of the two biggest markets showing a significant slowdown, that's why we have a tremendous collapse," said Gordon Johnson, a solar analyst at Axiom Capital Management in New York. The solar index has lost 25 percent since reaching a 13-month high on Feb. 18.
Manufacturers of solar cells, the device fastened to panels for converting sunlight into electricity, have cut their price about 21 percent this year, prompting panel makers to follow suit, according to Bloomberg New Energy Finance.
Global installations of photovoltaic devices doubled last year as developers rushed to hook up equipment in Germany before the government lowered incentives. New plants still may increase by about 30 percent this year as the cost of solar energy drops to near the rate consumers pay for power from the national grid in some of the sunniest parts of California and Turkey.
That's made Charles Yonts, a solar analyst at CLSA in Hong Kong, optimistic that the industry can work through its inventory without suffering additional declines.
"The worst has passed for demand, but now it's a question of working through the inventory and that's difficult," said Yonts, who recommends investors buy Trina Solar and Trony Solar Holdings Co. of Hong Kong. "Prices have fallen so much that returns are now attractive."