Two small markets promise favorable system returns despite other constraints.
Portugal’s solar market is one of the hottest for investors through 2013, according to Lux Research’s latest Solar Demand Forecaster. The country’s steadily rising Internal Rates of Returns (IRR) for the six major solar technologies push that country to a nearly 400 MW annual market in 2016.
“Elsewhere in Europe, high solar potential and favorable IRRs for investors are countered by uncertainty surrounding incentives--which could slow growth moving forward,” said Matt Feinstein, the Lux Research Analyst who led the Demand Forecast. “Italy and Germany will remain the Continent’s most stable markets with returns hovering near 9% and 22% through 2016, respectively, thanks to annual incentive step-downs.”
New Jersey--where high Solar Renewable Energy Credit prices pushed IRRs into the 40% range in 2010 and early 2011--begins to suffer the effects of dramatic oversupply, forcing a collapse in prices with no floor in place. California--the largest market in the U.S.--will continue to see steady growth thanks to stability and visibility with step-down incentives and recent RPS (Renewable Portfolio Standards) legislation.
India is another market worth watching. With quarterly IRRs skyrocketing past 20% thanks to the newly introduced National Solar Mission, it could become one of the strongest demand markets through 2016--if subsidies are extended past 2013, as expected.
IRR is the discount rate at which the Net Present Value (NPV) of future cash flows from a capital investment equals zero. Capital expenditure is the primary factor in determining a market’s IRR, along with incentives and operating expenses. Put simply, it provides an apples-to-apples metric for investors to compare demand and project growth for solar across disparate markets.
Further Information: Lux Research (www.luxresearchinc.com)
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