The Government Has Solar’s Back

Yesterday, I talked about the tremendous year the solar industry had in 2010. While the S&P was up nearly 20%, some companies saw gains as high as 80% and 120%.

And for the first time ever, the industry installed over 1 gigawatt of capacity.

Solar has a lot of momentum going into 2011.

And that tailwind is being reinforced by the government.

For the past few years, they have been giving the industry all the help they can in the form of tax credits, grants, and incentives. These totaled $2.5 billion last year. That was four times the 2009 amount.

One example is the Treasury Grant Program (TGP). It lets the owner of a commercial solar project take a 30% cash grant instead of a tax credit.

The TGP was set to expire at the end of last year.

But the government wasn’t about to let all the momentum the solar industry has built up slip away.

So they extended the TGP for another year.

The government is aware that this is about jobs too. Job growth for solar companies is forecast to be 26% over the next 12 months. That compares to 2% for the overall economy.

And the job growth should continue. The industry is expected to add 24,000 new jobs this year and nearly 300,000 jobs in the next 5 years.

You can bet that the government will do everything it can to support an industry that can wean us off our foreign oil dependency and add jobs at the same time.

So 2011 will likely be another strong year for solar. The question then becomes: Where should you consider investing?

The largest photovoltaic manufacturer in the world is First Solar (FSLR), the blue line in the chart below. The company is headquartered right here in the US but does a significant amount of business globally.

Another option is JA Solar Holdings (JASO), the red line in the chart. They are located in China and sell their solar cells to larger manufacturers.

Finally, look at LDK Solar (LDK), the yellow line in the chart. Also located in China, LDK is more of a fully integrated solar company. They produce their own solar cells, develop solar projects, and sell materials to other solar companies.

Wherever you invest, keep a close eye on your positions. Subsidies and tariffs can change at any moment and have a major impact on a company’s business. Use a 25% trailing stop to protect profits and capital.