Solar energy is becoming a power to be reckoned with

Solar companies are likely to benefit from a new global warming treaty, says Nicola Donnelly of Wheb Asset Management

In December, 192 of the world's leaders will meet in Copenhagen to try to approve a treaty to reduce global warming.

The negotiations are already fraught with discord between developing nations and the US and EU on whether or not to extend or replace the Kyoto protocol, which specified no restrictions for developing countries. A key obstacle to negotiations is that the US is unlikely to have passed its own domestic laws to control emissions, although these will probably come in 2010.

All the same, global consensus that something needs to be done remains strong. China could emerge as an unlikely champion of climate change. Hu Jintao, the Chinese president, has talked about reducing emissions for the first time and is pushing renewable energy as a massive investment opportunity - something in which China intends to lead the world.

One industry that is sure to benefit from any deal is solar power. It has emerged from the crisis as a truly global industry by operating more efficiently and taking advantage of strong political support around the world. I have met several management teams of solar companies, and all have spoken of a pick-up in orders and improved visibility. My optimism remains cautious, but I think we have reached a turning point in the solar cycle, and the market is starting to wake up to this. The share prices of First Solar, a US solar company, and Yingli Green Energy, a Chinese firm, were up 33 per cent and 21 per cent respectively in September, albeit both from low levels.

First Solar has announced that it will build the world's largest solar power plant in China. It will be about 30 times larger than existing solar stations in Europe. The station will be a 2,000 megawatt complex; one megawatt is enough to power more than 1,000 Chinese homes. China expects to increase its solar capacity from 150 megawatts in 2008 to 20,000 megawatts by 2020 as part of $300bn of investment in renewable energy.

Support for solar power is strong in the US: the Department of Energy has been very active in providing grants and loans, and a number of large 'utility-scale' projects are being planned - for instance, Yingli Green is considering a solar plant for Texas.

Despite the upward charge in the global equity markets, some areas of the renewable energy market are still trading at particularly depressed levels and beginning to look extremely interesting, given their long-term growth prospects. I believe we are at the start of a prolonged bull run, especially for companies exposed to environmental trends.

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