By Glen Martin, The Financialist

While the solar industry is going through something of a rough patch in the United States, the sun still shines in other parts of the world – a strong indication that better days are ahead for this vital source of clean power.

Germany and China, in particular, remain deeply committed to photovoltaic (PV) power.  Germany is proceeding with an ambitious scheme to move energy production from fossil fuels and nuclear fission to renewable resources like solar and wind power.  Not surprisingly, the plan is buttressed by hefty government incentives: Citizens who power their homes with rooftop PV panels can market their surplus output to the national grid at generously subsidized prices.  Solar panel arrays are now ubiquitous in German residential areas and commercial centers alike.  Today the country gets a substantial 20% of its electricity from solar, wind and other renewable resources.

In its latest sector review, Solar Snippet, Credit Suisse estimates that, by the end of the year, driven by strong overseas demand, worldwide PV module installs will total 27 gigawatts, an 8% increase year on year. Overall, Credit Suisse expects solar capacity will increase by 39.2 gigawatts in 2012, up 46% from 2011.

Many of the solar panels fueling that growth are manufactured in China, which in a relatively short time has become the world’s biggest producer of solar panels.  The United States alone bought $3.1 billion of bargain-priced Chinese-made PV panels last year, half the US total. China’s low cost PVs motivated a stiff antidumping tariff from the Commerce Department in May – angering both Chinese manufacturers and American solar system installers, who maintain the move will drive up the costs of solar power in the US.

But China isn’t only exporting its solar panels – it’s also absorbing a great number of them internally.  This year the country appears on track to install enough photovoltaic panels in 2012 to produce electricity to power several million homes.

Of course, that’s not to say that it is all blue skies for solar energy. In the US, the abundance of natural gas is exerting a dampening effect on renewable energy.

“When natural gas was at $6 per million Btu, it looked like solar was getting pretty competitive,” says Severin Borenstein, the E.T. Grether Professor of Business Administration and Public Policy at the University of California’s Haas School of Business and the co-director of the Haas Energy Institute.

That was especially the case for mid-scale arrays, generating around 20 megawatts of power and large-scale projects, continues Borenstein.

“Then with the fracking boom, the price of gas tanked to around $2.  Now it’s up to maybe $3, but I don’t see it getting pricey for a long, long time.”

As long as natural gas is plentiful and cheap, Borenstein observes, utilities will prefer it over solar, regardless of the latter’s superior clean and green credentials.  The infrastructure already exists for gas distribution, and the cost of gas-generated electricity is cheaper than solar power—despite the fact that the average price of Chinese PVs has dropped by 75% since 2010.

Still, solar can’t be counted out in the United States, insists Jigar Shah, a founder of the solar company SunEdison and a partner in Inherjys, a $1 billion clean tech fund based in Montreal.

“Yes, solar is facing challenges, particularly in the (PV panel) manufacturing side where there’s not much profit,” says Shah. “You hear a lot of dire pronouncements, but out there in real world people are installing solar panels faster than ever.”

Incentives are helping to maintain interest in solar developments, Shah acknowledges. “The 30% (Federal Renewable Tax Credit) has been extended to 2016, and there’s a whole array of incentives in states with renewable energy portfolios. They’ve made a real difference.”

Such incentives for solar have been much maligned, and are often used to support the argument that the sector can’t make it on its own. Still, government support for energy isn’t new; it’s an integral part of the process of bringing new sources and new technologies to the marketplace.  Moreover, US incentives for renewable energy are far outstripped by subsidies for fossil fuels.  According to the Environmental Law Institute, renewable energy received slightly more than $12 billion in government disbursements and tax credits between 2002 and 2008. Oil, gas, and coal producers received $70 billion in direct support and tax considerations over the same period.

While low natural gas prices and regulatory uncertainty in the US might delay the full adoption of solar as a viable and competitively-priced source of energy, these issues have not derailed the sector, which remains well on its way to establishing itself as a robust and affordable energy source both in the US and across the world.

For more on this story go to:

http://www.thefinancialist.com/the-largely-positive-state-of-global-solar/