ETF Database submits:
With low levels of economic growth predicted for much of the world, demand for many commodities has been modest to say the least. This has helped to keep the price of oil in check and force the commodity to trade in a dollar range between – a barrel for much of 2010. While welcomed news for most consumers who have been especially hard hit by the crisis, this has been a terrible development for the alternative power industry which thrives on higher costs for traditional power sources in order to make its products competitive.
In the past, alternative power companies could compete with oil and coal thanks to large subsidies from governments around the world. However, as balance sheets have become more bloated, many governments have resorted to cutting solar power subsidies in order to cut expenses without having to fire state workers or cut benefits. Germany, one of the world’s leaders in alternative energy, cut solar power subsidies by close to 16% which sent many solar companies tumbling and has set the stage for further cuts in other developed markets, including the U.S. where a small company was forced to abandon a 0 million project after failing to obtain financing earlier this year. In addition to cutting into solar power company earnings, these cuts in subsidies have also pushed up the price point at which solar is competitive with oil which is helping to further cloud the outlook for the solar industry in 2010.