RBC Capital Markets yesterday released a new report;

Here comes the Sun

a bit of a clichéd title, which makes you think of this Beatles song

The report is by Stuart Bush, their lead alternative energy equity analyst for RBC Capital Markets.

It makes the following recommendations for solar investors which I have abbreviated below;

* Play the Supply Chain: e.g. silicon, wafer and cell producers will generate higher margins than the labor-heavy and low barrier-to-entry module and installation segments.

* Play Tech Differentiation: companies with higher efficiency products or lower-cost thin-film designs are better suited to command superior profits long term.

* Play Globally: An investment strategy that seeks to pair Asian producers long versus European producers will benefit in the long term.

* Play within a Geography: Investing among companies located in particular regions, such as Germany or China, will limit exposure to cross-border macro trends and highlight comparably strong regional producers.

Here are two other points it makes which I think are very interesting;

i) The forecast for thin-film solar growing from 6.5 per cent of the market in 2007 to 19 per cent in 2011 - a real turnaround if this happens, as this is a technology that has not delivered anything its promise thus far
ii) the total industry average installed cost for photovoltaic solar will decline from about $7.37 per kilowatt in 2007 to about $4.40 in 2011, and achieve organic competitiveness with grid electricity at about $3.50 per kilowatt, without incentives and depending on the region in 2012-2014 - this really is quite optimistic, I think a 30% drop over the next 10 years to 2017 is more likely, but who really, really knows?

And let's face it, even if solar prices continue not to fall, the technology will at least reduce in real terms, on the tide of rising incomes.