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Another factor that, ironically, could help kick-start some solar projects is the plummeting cost of solar equipment caused by the downturn. The Solar Energy Industries Association estimates that the price of solar panels has dropped 25 percent from last summer, and that it may fall another 10 percent by this summer. Some industry observers expect that prices could fall by as much as 50 percent from last year.

Alain Harrus, a partner at Crosslink Capital, a venture-capital firm that has funded First Solar, among other renewable-energy firms, argues that these price drops could have “a huge impact on total cost of capital to start a project.”

Rogol says that further price drops are possible, but he adds that prices could soon climb again, thanks partly to demand created by government stimulus efforts in the United States, Japan, and other countries.

The problems facing the solar industry are mirrored, to a lesser degree, by those rippling through the more established wind-power industry.

Both FPL Group, the largest wind developer in the United States, and Renewable Energy Systems (RES) America have scaled back plans for new projects for 2009. RES said recently that it would cut new construction by half, from 1,300 megawatts to as little as 600 megawatts, blaming the tight capital markets. At least five different European wind-power projects–Alpha Ventus, Nordergrunde, Butendiek, Offshore Park Innogy Nordsee, and the London Array–have been slowed by financing issues or the loss of investors.

Michael Ware, managing director of investment at Good Energies, says that the stimulus package has rekindled interest in solar and wind projects–and brought some potential investors back to the table. “The market is showing new signs of life,” he says. “But we certainly aren’t out of it: to think it’s gone back to pre-September is not the case.”

Even if the situation improves, some believe that it will be a while before the industry starts to show real signs of recovery.

Judy Chang, a principal at the Brattle Group, an economics consultancy, says that financing negotiations will remain drawn out, slowing many projects further still. But as long as governments around the world remain committed to renewable energy, she believes that the future of the industry is assured. “The end of 2009 is what people are hoping for,” Chang says.

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Credit: The Center for Land Use Interpretation

Tagged: Business, Energy, renewable energy, solar power, solar market, solar industry, solar power plants

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