NEW YORK (AP) -- Shares of solar panel makers rose Friday after Citibank suggested worldwide demand for panels is rising and First Solar received approval to restart construction of a solar farm in Northern Los Angeles County.
Citibank analyst Timothy Arcuri wrote in a research note to investors that demand for renewable energy may have reached a low point and is ready to turn up as prices for renewable power gets closer to the price of power from traditional sources.
Shares of First Solar, which manufactures panels and builds solar energy projects, were propelled even higher by the company's announcement that it had reached a deal with Los Angeles County officials to resume construction of a solar farm that had been held up by a safety certification problem. Investors worried that the project's cost could rise if First Solar was forced to retrofit its modules, according to Rob Stone, an analyst at Cowen Group.
First Solar Inc. shares rose 9 percent.
Solar panel manufacturers have seen their profits and share prices collapse in recent months because a glut of solar panels on the global market has reduced panel prices. A large increase in manufacturing capacity became available just as subsidies for renewable energy were falling in Europe, which is by far the world's biggest market for solar technology.
But the drop in panel prices has made solar power less expensive, and more attractive to homeowners and utilities. U.S. Solar installations surged 85 percent in the first quarter of this year as prices have dropped 47 percent. Last year solar installations more than doubled compared with 2010.
Citi's Arcuri said the global oversupply of panels is still a problem, but "a tipping point in solar is at hand." Japan is increasing subsidies for solar in an effort to move away from nuclear power in the wake of the Fukushima nuclear disaster. U.S. installations remain strong. And Arcuri said new pockets of demand are developing around the world in places where solar can compete without subsidies, such as Bahrain, Jordan, Chile, Ukraine, Serbia and Puerto Rico.
Cowen's Stone urges caution, however. He does not yet recommend solar for long-term investors because he believes it will still be "a few more quarters" before solar panel makers can adjust to new lower prices.
He expects the share prices of solar panel makers to remain very sensitive to news, and routinely make sharp moves — up or down.
"For a long-term investor, it may be less trouble on the stomach to not hold the (solar) names for a while," Stone said.
In afternoon trading Canadian Solar Inc. rose 6.4 percent, Sunpower Corp. rose 6.1 percent and Suntech Power Holdings Co. Ltd. rose 3.7 percent.