Solar Stocks Beaten on German Subsidy Cut Headlines - Invesco Solar ETF (ARCA:TAN), First Solar (NASDAQ:FSLR)

Solar stocks have been beaten in recent months. Within the last year, the Claymore/MAC Global Solar Index [ETF]

TAN

is down more than 65%. Us as consumers can even get a 30% Federal tax credit though December 2016 if you install solar panels on your roof. However, sadly, consumers will not create the demand needed to fuel the industry themselves; the solar industry needs major corporations to join in. As we stand currently, the solar industry depends largely on government subsidies in order to operate, even though input costs, mainly the solar modules, are coming down in price. To add insult to injury to an already beaten industry, a headline crossed today saying that Germany will likely cut solar subsidies by 30% in 2012. Shares of First Solar

FSLR

, and other solar names are trading lower on the session after the headline crossed saying that Germany would cut solar subsidies further. However, just last week,

Digitimes

published an article saying that the global solar market will grow by 11.9% to 26.9GW in 2012. According to the article, the industry had oversupply issues last year, which led to price drops, but the rapid decline in the cost PV systems boosted new demand. Most solar names, particularly First Solar has lost approximately 70% of its market cap since January 2011. Benzinga contacted Adam Krop, solar analyst at Ardour Capital, for his take on the industry. "In regards to German solar subsidies, they are set up to digress every year," Krop said. "Germany lowers its solar subsidy program every year by a certain percentage, depending on industry demand." "We don't expect solar sector equities to bottom until 2H12," Krop continued. "We currently are forecasting over 22 gigawatts of demand in 2012, versus supply of about 40 or more gigawatts. So we believe the sector will remain under pressure for a little while longer." He concluded, “The European market peaked in 2010 and is no longer the volume growth driver for the solar industry. We look for China, India, Japan and US to be the growth drivers going forward.”

ACTION ITEMS:

Bullish:
Traders who believe that investments in clean energy will continue to grow, you might want to consider the following trades:

If you think subsidies for clean tech will not shrink and investments will continue to grow you might want to check out the PowerShares Cleantech Portfolio PZD

If you think First Solar is still the leader in the solar industry and abelieve the recent sell-off is overdone, try longing shares of First Solar FSLR or buying 2013 call options.

Bearish:
Traders who believe that subsidies will continue to be cut for clean tech, you may consider alternative positions:

If you think Europe will continue to struggle and in turn subsidies in clean tech will be cut, trying shorting the iShares S&P Global Clean Energy Index ETF ICLN

If you think this is just the beginning of the clean energy sell-off, you might want to short shares of Sunpower SPWR or buy 2013 put options.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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