Tickers in this Article: KWT, ESLRQ, WFR, TSL, YGE, JKS, STP, BRK.B, FSLR, GE, NEE, EXC
Throughout 2011, the sun hasn't exactly been shining for investors in the solar sector. During the last year, a multitude of factors have sent the sector into a tailspin. Bankruptcies, plunging global demand and European austerity measures have certainly had their way with stock prices for the photovoltaic (PV) makers and suppliers. Overall, broad sector measures like the Market Vectors Solar Energy ETF (ARCA:KWT) have declined by more than 60% so far this year. While the long term promise of the sector may still look attractive, many analysts predict that we are witnessing a period of "survival of the fittest." As the sector continues to evolve, we look back at some of the biggest solar players. (For related reading, see Spotlight On The Solar Industry.)

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Challenging Conditions
The slowing global economy is putting heavy downward pressures on the solar sector. With many governments around the world bogged down in debt and strapped for cash, subsidies have fallen by the wayside. Many utilities have pushed alternative investments to the back burner in the face of abundant natural gas. Smaller solar project developers have also had a hard time obtaining credit in today's tight market place. Many small scale and local PV projects now sit idle, until the lending environment improves. This slack demand and massive oversupply has lead to plummeting prices and profits for solar panel makers. In just over a year's time, prices for solar panels have gone from nearly two dollars a watt, down to about a buck.

This has created a deflationary environment within the sector, with project developers and installers wanting for prices to fall further. Already, three major solar producers have filed for bankruptcy in the U.S., including string ribbon pioneer Evergreen Solar (OTCBB:ESLRQ) and government-backed Solyndra. Most recently, MEMC Electronic Materials (NYSE:WFR) warned of restructuring due to difficulties with its solar unit. With margins continuing to be compressed, analysts estimate that the environment will root out much of the competition and leave just a few strong producers.

Chinese Producers Still Strong
2011's poor operating environment has essentially separated the solar industry into two camps: China and everyone else. While Chinese producers like Trina Solar (NYSE:TSL) and Yingli Green Energy (NYSE:YGE) have seen their share prices slide, solar equipment firms continue to compete heavily on price. These firms have benefited immensely from government support that includes massive low-interest loans and production subsidies within the nation. So much so, that the U.S. Commerce Department has begun investigations on whether Chinese producers are "dumping" PV cells on the world's market and pushing American manufacturers out of the industry. In the meantime, Chinese solar firms still offer some of the best operating margins in the sector. Analysts highlight cheap automated manufacturers like Suntech (NYSE:STP) and JinkoSolar (NYSE:JKS) as being real future winners. (To learn more about solar, read A Solar-Powered Home: Will It Pay Off?)

Buffett's Big Buy
Producers in U.S. did get a big year break when Warren Buffett's Berkshire Hathaway (NYSE:BRK.B) utility subsidiary, MidAmerican Energy, decided to purchase First Solar's (Nasdaq:FSLR) Topaz Solar Farm project for $2 billion. This comes on the heels of other First Solar utility scale PV projects with General Electric (NYSE:GE), NextEra Energy Resources (NYSE:NEE) and Exelon (NYSE:EXC). These deals help highlight that solar in the United States isn't dead just yet. Analysts predict that U.S. focus towards high technology solar offerings, such copper indium gallium selenide (CIGS) modules and high-conversion efficiency solar panels, will be what ultimately saves producers in the country.

The Bottom Line
For those investors in the solar sector, 2011 could be a year to forget. Slowing global growth, zero money for subsides and plunging demand have had their ways with the PV makers. Shares of solar firms have certainly seen better days. (For more, read Top 10 Green Industries.)

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At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article, but is long the Guggenheim Solar ETF (NYSE:TAN).

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