Industry experts analyze the sea of solar investments.

As the first cleantech sector to mature, the solar industry is entering a new phase filled with public stock offerings, mergers and acquisitions, and profitable businesses. However, analysts and industry players warn that solar still has some growing to do in order to bring prices in line with traditional energy resources (or “reach grid parity” in industry-speak) without the help of subsidies.

The solar industry has successfully commercialized residential, commercial and even utility scale products, making it attractive to venture investors looking for a safe bet as they arrive on the scene of the cleantech investment race.

For those eager to invest in solar in 2008, Sustainable Industries spoke with industry experts and analysts about what to watch for as solar hits its zenith.

Market trends
According to Tim Woodward, managing director of San Francisco-based Nth Power — one of the first venture firms to invest in solar more than 10 years ago — the public market for solar is now close to saturated. Solar companies began going public in a big way in 2005, most notably with the storied initial public offering (IPO) of SunPower (Nasdaq: SPWR), during which the company’s stock jumped 41 percent on the first day, prompting comparisons to dot-com IPOs. Solar companies have continued to go public with far less fanfare in the years and months since.

Solar companies looking to go public now need to be offering a unique product or service in order to differentiate themselves enough to pique investor interest, says Woodward. That wisdom goes for American venture-backed startups, as well as the large number of Chinese solar manufacturers gaining traction in the market. Meanwhile, the consolidation of the solar market, which analysts have been predicting for the last two years, finally began with SunPower’s acquisition of PowerLight in January 2007. The trend is likely to continue, with more solar mergers and acquisitions rumored for late 2007 and beyond.

Many mergers in 2006 were driven by a silicon shortage, as larger companies bought up small or struggling companies in order to secure access to more silicon. Now, consolidation is characterized by larger energy companies buying into the solar market, or by companies that are strong in one area of the value chain buying into another, as manufacturer SunPower did when it acquired installation and service provider PowerLight. Which is not to say the silicon shortage or its effects are over, despite reports to the contrary. “The biggest short-term problem for the solar industry remains silicon supply and pricing,” Woodward says, adding that, as more supply comes online, it is being consumed by the increasing demand for solar, which has resulted in costs not coming down as quickly as people thought they might.