Update: Deutsche Bank Says Solar Industry Untouched By Oil Glut

With demand for solar power driven by government policies and natural gas prices, the sector's recent steep decline in the stock market on oil-glut worries might mark a buying opportunity, an analyst said Monday.

Unless the outlook for gas prices deteriorates sharply, "we see no major impact" on demand for solar power in the near term, Deutsche Bank's Vishal Shah said in a research note.

Shah said recent oil-price weakness will have limited or no impact on the industry. But a decision last week by OPEC to maintain its current daily pumping quota at about 30 million barrels per day sent the sector into a tailspin.

For further coverage on Shah's note, click here.

The Guggenheim Solar ETF TAN is down more than 10 percent in the past week to $33.88, while the Market Vectors Solar Energy ETF KWT is off by nearly as much.

In the past three months, both funds are down more than 20 percent, falling nearly in tandem with the United States Oil Fund LP ETF USO.

But Shah continues to believe demand in the U.S. will double between now and 2016, while China appears unlikely to alter its policies driven by air pollution and other environmental concerns.

The recent sector sell-off occurred even as reports dribble in that at least in certain scenarios, alternative energy, including solar, has become cost competitive with conventional power.

For example, the asset management firm Lazard recently estimated that a utility scale solar power plant operating in the Southwest U.S. without current tax subsides can produce electricity at a cost of $72 to $86 per megawatt hour, vs. conventional plant's costs ranging from $61 to $332 per megawatt hour, depending on fuel.

U.S. investment tax credits related to solar are currently set to expire in 2016.

In many other markets, solar demand is driven by the technology's improving economics driven by its parity with gas-based electricity generation, Shah said.

While Shah believes all solar companies are insulated from oil price volatility, companies with exposure to U.S. residential solar market are the least likely to feel affects.

"We don't see U.S. retail electricity prices declining in the near term," Shah said.