Solar sector set to shine through credit crunch

By Eva Kuehnen

FRANKFURT (Reuters) - Solar power will be a bright investment prospect as the appetite for green energy grows, even though the global credit crisis is making banks more wary of providing financing.

In the short term, the sector will also have to contend with a shortage of silicon, a key ingredient for solar cells that turn sunlight into electricity, and possible changes in political support as elections take place.

"This year will be a very volatile year," said Sven Hansen, chief investment officer at clean technology investor Good Energies, which has about 7 billion Swiss francs ($6.38 billion) under management.

"The industry will see fantastic growth, but it will be a bumpy ride in terms of how financial markets value photovoltaic companies."

The number of new large-scale solar energy plants has been growing rapidly particularly in sun-drenched countries like Spain and Italy, but also in Germany and the United States, where regulatory conditions offer incentives and stable returns for investors.

Conditions could change because of a presidential election in the United States and general elections in Spain in March.

"Whether there are support programs in place has a strong impact on markets' development," Hansen said.

Growth is still expected to be strong, driven by increased interest from institutional investors, such as pension funds and insurers, which are seeking alternative stable and long-term opportunities.