2018 was another rough year for the solar industry. Installations are expected to fall nearly 15% to 85,000 megawatts, according to estimates from GTM Research, and the biggest manufacturers in the world are experiencing falling margins and profits as a result. There are a few bright spots, including Vivint Solar (NYSE:VSLR) and Sunrun (NASDAQ:RUN), which have seen lower solar panel prices as a tailwind, but overall it's been a bad year for the industry.

The question for investors now is whether the sun will finally shine on the solar industry in 2019. There may not be an easy answer, given what we know today.

Everything that could go wrong did in 2018

The two markets driving the global solar industry are China and the U.S., and they both had bad years in 2018. China, which installed about half of all solar that was added in 2017, changed its solar incentives mid-2018 and put a cap on ground-mounted solar projects from the National Development and Reform Commission and reduced feed-in tariffs. The impact was a sharp decline in midyear demand that led to about a one-third decline in solar panel prices. Naturally, solar panel manufacturers felt the impact and are reporting lower margins in the second half of the year.

In the U.S., President Trump's tariffs hit the solar industry in February, adding a 30% cost to all imported solar panels. Installers prepared by stocking up on panels in 2017, which led to a lull in demand in early 2018. Unfavorable policies from the administration have also been an incremental negative for the solar industry in 2018.

At times, when one or two markets fall, another will rise and take their place, but as the No. 1 and No. 2 markets, China and the U.S., declined in 2018, there weren't any big sources of demand to fill the gap. Japan's demand was relatively weak, and markets such as India and Africa aren't large enough to make a big dent in global installations, leading to the decline in installations.

Since the solar market is global, it didn't spare anyone, which is why First Solar (NASDAQ:FSLR) wasn't insulated the way it was in 2017 and has fallen 37% this year. Even the best solar manufacturer hasn't been spared.

A few bright spots heading into 2019

As bad as the year was for the solar industry overall, there were some bright spots. Installers see falling solar panel prices as a cost reduction on their end, making projects more cost-effective.

In the U.S., 8,500 MW of contracts for solar farms were signed in the first half of 2018, a record for the industry. Most of those bookings won't turn into installations until 2019 or after, but if the trend continues, the U.S. solar industry should begin growing again.

In China, JinkoSolar's management recently said low panel prices have led to better-than-expected installations. Late 2018 sales are still being made at low prices, but manufacturers will take lower prices if they can maintain high volumes. That's the most bullish indication we've gotten from China since the market collapsed in June.

SunPower (NASDAQ:SPWR) got some good news this fall, when it was given an exemption from solar tariffs on its high-efficiency solar cells and panels. The exemption will save the company about $2 million per week in tariffs. But given the timing of the exemption, management doesn't expect those savings to hit financial statements until 2019.

On its feet again

Solar is still driven by national and local policies, and 2018 was about as bad as it could get for the industry. But heading into 2019, there are some bright spots from lower costs and higher bookings to exemptions that will save U.S. companies millions of dollars. I don't think 2019 will be as bad as 2018 was for the solar industry, and it may be time to get cautiously bullish on this disruptive sector.