Portugal Solar Market Heating Up, New Jersey Tops Investor Returns For Now

Portugal’s solar market is one of the hottest for investors – and is likely to supplant New Jersey at the top of the list – according to a market report. 

Lux Research’s latest Solar Demand Forecaster says steadily rising internal rates of returns (IRR) for the six major solar technologies will push Portugal to a nearly 400 MW annual market in 2016.

IRR is the discount rate at which the net present value of future cash flows from a capital investment equals zero. Capital expenditures are 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.

"Elsewhere in Europe, high solar potential and favorable IRRs for investors are countered by uncertainty surrounding incentives – which could slow growth moving forward," says Matt Feinstein, a 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 – is beginning 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 Renewable Portfolio Standard legislation.

India is another market worth watching, Lux says. 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.

Top 5 Locations by IRR (2Q11)

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

The six major photovoltaic technologies tracked by Lux Research are monocrystalline silicon (c-Si), multicrystalline silicon (mc-Si), cadmium telluride (CdTe), copper indium gallium diselenide (CIGS), thin film silicon (TF-Si), and high concentrating photovoltaic modules (HCPV).

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