SunPower: Japanese Solar Industry's Worst-Case Scenario Is Now A Reality.

This article was first published by Seeking Alpha on January 14, 2015

By Sarfaraz A. Khan.

Solar stocks have been struggling over the last few months on fears that the weakness in oil and gas prices will wipe out the demand for solar energy. To exacerbate, Japan, one of the biggest markets for the solar industry, could witness significant reductions in PV installations this year as the country has tightened the rules on incentive payments.

The Guggenheim Solar ETF (NYSEARCA:TAN) - which includes more than two dozen leading players of the global solar industry -- has fallen by 20% while the shares of the Silicon Valley-based SunPower Corporation (NASDAQ:SPWR) have plummeted by 31% over the last six months.

Earlier in December, Japan's Ministry of Economy, Trade, & Industry made revisions to the country's lucrative feed-in-tariff scheme which has played a key role in fueling the growth of the country's solar industry over the last two years. The new rules give more flexibility to utilities when it comes to accepting electricity from PV operators.

Moreover, a solar power project can only be considered for feed-in-tariffs once the output is connected to the grid, as opposed to previous rules that relied on permits. PV operators will also be required to install systems that control flow of power, which increases the per-unit installation cost. These and other measures will have a negative impact on solar installations in Japan. According to a December report emailed to me from Axiom Capital's Gordon Johnson, the PV installations in the country in 2015 will come in at 4.5GW, down from his previous estimate … read full article at Seeking Alpha.