Text size

Roughly 30 countries have reached "solar grid parity," according to Deutsche Bank in a bullish report issued on February 27.

We all know solar energy is clean but the question on investors' mind is: Can the solar industry survive on its own without government subsidies?

Yes, said Deutsche's Vishal Shah, who looked at 60 countries globally and concluded that in about half of them - the largest markets from U.S. to Japan to Germany - the cost of solar electricity is already below the cost of retail electricity. Building solar systems have become cheap, from $1 per watt at the low-end for utility scale applications in India and China to $2.90 per watt at the high-end for small residential installations in the US. China and India are very close to grid parity.

Here are excerpts of Shah's bullish calls:

In the US, for instance, we believe solar is currently competitive in more than 14 states without any additional state subsidies. Solar LCOE in these states ranges between 10-15c/kWh and compares to retail electricity price of 12-38c/kWh. By 2016, using our cost estimates, nearly 47 states would be at grid parity in the US, in our view. Similarly in Japan, solar LCOE of ~$0.14/kWh compares to retail electricity price of ~$0.26/kWh. In India, the ratio of coal based electricity to solar electricity was 7:1 roughly 4 years ago. That ratio is now less than 2:1 and likely approaching 1:1 this year.

YieldCo has been in fashion lately. Last month, First Solar (FSLR) and SunPower (SPWR) announced to form a YieldCo together. "The reduction of financing costs through yieldcos could act as a significant catalyst for the Indian solar market," wrote Shah. Chinese solar companies are already talking about YieldCos.

Solar names have rebounded as oil has advanced from its lows. The Guggenheim Solar ETF (TAN) is up 15.8% this year. Trina Solar (TSL), Deutsche's favorite U.S.-listed Chinese solar name, has gained 13.1% this year. Jinko Solar (JKS), Credit Suisse's favorite, has advanced 11.1%. Canadian Solar (CSIQ), which has substantial exposure to the China market, has jumped 22.5% this year.

Chinese solar companies jumped in Hong Kong today after a documentary on pollution was aired in China over the weekend and got over 20 million views on China's YouTube. The timing of it has prompted analysts to speculate environmental protection will be a key theme at the National People's Congress this week, which is good news for all clean energy sectors. See my earlier blog "China’s Foul Air In Focus Ahead Of The National People’s Congress".