European markets hot for solar despite financial crisis

BOSTON, USA: Portugal’s solar market remains one of the hottest for investors able to build systems under that country’s installations cap, according to Lux Research’s latest Solar Demand Forecaster. The country’s internal rates of returns (IRR) for the six major solar technologies remain 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,” said 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 percent, the Philippines at 22.6 percent, and Japan at 20.9 percent. 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 5 locations by IRR (1Q12)
1. Portugal
2. Cyprus
3. Hawaii
4. Greece
5. Israel