The global solar market jumped by 40% in 2011 despite subsidy cuts in several major markets.  According to industry research firm Solarbuzz, installations jumped to about 27.4 GW last year, driven by new production capacity and price cuts. Industry revenues increased by 12% in the same year, indicating dropping prices as well as margins for equipment manufacturers like SunPower (NASDAQ:SPWR) and Trina Solar (NYSE:TSL).
European demand continued to drive the market with the region accounting for 68% of global capacity. However the top two markets – Germany and Italy – have announced large cuts this year to curtail additional installations, which could hurt demand going ahead in 2012.
We have a $12.74 price estimate for SunPower, which is at a 60% premium to its current market price.
Three of the top five markets for solar equipment were from the European Union.  Market leader Germany and other countries have announced sharp cuts in subsidy support to solar electricity to curtail capacity additions. Germany installed close to 7.5 GW of solar capacity in 2011, more than double the government’s target for the year.
Installations have risen despite cuts because of a sharp drop in equipment prices, which has hurt panel manufacturers like SunPower. The German government is therefore looking to revise subsidies every month to better control solar installations going ahead. Other countries in Europe are also taking similar steps, pushed by the need to tighten budget deficits.
Industry participants hope that falling demand from Europe could be replaced by sales in growing markets such as the U.S., China and India. China became the 3rd largest market for solar equipment in 2011  and is expected to grow even further this year. Higher installations in China could help reduce the impact of the overcapacity situation that is troubling SunPower and other panel manufacturers by pulling down prices and margins.
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- Suntech CEO Pins Hopes on Chinese Growth to Drive Sales (trefis.com)
- SunPower Beats Estimates on Residential Push (trefis.com)
- World Solar Photovoltaic Market Grew to 27.4 Gigawatts in 2011, Up 40% Y/Y, Solarbuzz [↩] [↩] [↩]