Analysts at Deutsche Bank have predicted that the global solar PV sector will transition from a subsidised market to a sustainable market within a year, citing the arrival of “grid parity” in a number of key markets, unexpectedly strong demand and rebounding margins.

The Deutsche Bank team said key markets such as India, China and the US are experiencing strong demand and solar projects are now being developed with minimal or no incentives.

“While some risks around subsidy cuts in Japan and the UK market remain, we expect a more constructive outlook in most other emerging markets,” Deutsche Bank writes. “We see the sector transitioning from subsidised to sustainable markets in 2014.”

The Deutsche Bank analysis is the third in the past month to focus on the dramatic changes in the solar market, and the energy industry in which it is playing an increasingly profound role.

While reports from UBS and Macquarie focused on the impacts of solar on fossil fuel incumbents and prevailing business models – read UBS says boom in unsubsidised solar PV heralds energy revolution and Macquarie says rooftop solar juggernaut is unstoppable – the Deutsche Bank report focuses more on the upside for the solar manufacturing sector, which has been bleeding from oversupply, a price war and plunging share prices.

Deutsche predicts margins will rebound, and suggests that several leading manufacturers will actually start producing, or at least talking about, profits in the second half of the year.

The key for Deutsche is the emergence of unsubsidised markets in many key countries. It points, for instance, to India, where despite delays in the national solar program, huge demand for state based schemes has produced very competitive tenders, in the 12c/kWh range. Given the country’s high solar radiation profile and high electricity prices paid by industrial customers, it says several conglomerates are considering large scale implementation of solar for self consumption.

“Grid parity has been reached in India even despite the high cost of capital of around 10-12 per cent,” Deutsche Bank notes, and also despite a slight rise in module prices of 3c-5c/kW in recent months(good for manufacturers).

Italy is another country that appears to be at grid parity, where several developers are under advanced discussions to develop unsubsidized projects in Southern Italy. Deutsche Bank says that for small commercial enterprises that can achieve 50 per cent or more self consumption, solar is competitive with grid electricity in most parts of Italy, and commercial businesses in Germany that have the load profile to achieve up to 90 per cent self consumption are also finding solar as an attractive source of power generation.

Deutsche bank says demand expected in subsidised markets such as Japan and the UK, including Northern Ireland, is expected to be strong, the US is likely to introduce favourable legislation, including giving solar installations the same status as real estate investment trusts, strong pipelines in Africa and the Middle east, and unexpectedly strong demand in countries such as Mexico and Caribbean nations means that its forecasts for the year are likely to rise.

Supply outlook is also improving, which would keep polysilicon prices under control (below the key $25/kg levels) and major suppliers such as Wacker and Hemlock are likely to increase utilization rates in order to meet the strong demand from module customers.

The major solar manufacturers are due to report their latest results this week, and Deutsche expects a more positive narrative of stabilize pricing, increasing demand, and improving margins. “Profitability as a module supplier remains challenging, but project pipelines could enable margin recovery,” it says.

It cited the case of Yingli, which released “pre-results’ data late last week, indicating higher than expected demand and shipments. Deutsche took this to mean that China will, in fact, deliver on its ambitious 10GW target in 2013.

“We expect Yingli to suggest stable pricing trends and improving profitability in the second half of 2013,” it wrote. Combined with control over operational expenditure and reduced cash burn, this would be a positive for its shares So much so, that Deutsche is now reviewing its model for the company.