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Europe still a solar hot-spot

The European solar market remains hot despite the financial crisis and subsidy cuts, according to analyst Lux Research.

By Kari Williamson

Portugal’s solar market remains one of the hottest for investors able to build systems under the installations cap. The country’s internal rates of returns (IRR) for the 6 major solar technologies remained high in 2011 along with Cyprus and Greece, though the financial crisis in Europe could significantly hinder that market.

“Uncertainty surrounding Europe’s financial situation and its countries’ ability to pay out incentives will prevent wild growth – keeping that market relatively constant,” says Matt Feinstein, the Lux Research Analyst who led the Demand Forecast.

“However, a number of Asian markets have high returns going into 2012 – notably Malaysia at 24.1%, the Philippines at 22.6%, and Japan at 20.9%. They will push demand toward that region in 2012 and 2013.”

IRR is the discount rate at which the net present value (NPV) of future cash flows from a capital investment equals zero. Capital expenditure is 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.

Top 6 locations by IRR (1Q12)

  1. Portugal
  2. Cyprus
  3. Hawaii
  4. Greece
  5. Israel

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Photovoltaics (PV)  •  Policy, investment and markets  •  Solar electricity