The 5 hottest solar markets for investors

Lux Research pinpoints five solar markets where high demand and aggressive incentives have created some surprising investor hot spots.

It's hard to imagine investors finding much opportunity in Portugal, a country with a stagnant economy that is mired in debt and high unemployment.  But according to Lux Research's Solar Demand Forecaster Portugal will have one of the hottest solar markets for investors through 2013.

Lux Research pinpointed the five hot solar markets of tomorrow using internal rates of return (IRR), an apples-to-apples metric that allows investors to compare demand and project growth and ultimately determine how profitable an investment will be. The higher a market's IRR, the more desirable it is for investors.  Capital outlay, incentives and operating expenses help determine the IRR of a particular market.

The top five locations by IRR in the second quarter of 2011, according to Lux Research:

  1. New Jersey
  2. Portugal
  3. Australia
  4. Italy
  5. India

Falling solar prices are driving demand. Still, policies that mandate renewable energy use or that provide incentives are hugely influential. Take New Jersey for example.

The state's aggressive renewable energy portfolio standard, which requires 22.5 percent of the electricity sold by utilities to come from renewable energy by 2021, has helped fuel growth in the solar market. But the primary driver in 2010 and in early 2011 has been high Solar Renewable Energy Credit prices, Lux Research said in a release Tuesday. New Jersey reached the 10,000 solar installation milestone earlier this summer. The state is only second in the nation behind California for both installed solar capacity and number of installations.

However, hot markets aren't always stable. An oversupply of renewable energy credits (SRECs) in New Jersey, which can be traded to utilities and are a major means of financing solar projects, has led to a steep drop in price on the spot market, the Philadelphia Inquirer reported last month. That collapse in prices is already having an impact in New Jersey, according to Lux Research. In comparison, California's step-down incentives and new renewable portfolio standards legislation will help it maintain steady and stable growth.

India's newly introduced National Solar Mission has turned the country into an desirable destination for investors. And this is just the beginning. India could turn out to be one of the strongest demand markets through 2016 if subsidies are extended past 2013, as expected.

Photo: Solarcity


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