Solar sector exchange traded funds brightened Monday as China, the world’s second largest economy, said it plans to quintuple its solar panel grid.
The Guggenheim Solar ETF (NYSEArca: TAN) rose 8% Monday while the Market Vectors Solar Energy (NYSEArca: KWT) increased 6.3%. The solar sector has been one of the best performing areas year-to-date, with TAN up 62.4% and KWT up 42.5%. [Solar ETFs Dazzle in the Second Quarter]
China will expand its installed solar capacity to over 35 gigawatts, or five times its current capacity, by 2015, adding about 10 gigawatts of solar-power capacity per year, Bloomberg reports. A gigawatt is equivalent to one billion watts.
The greater capacity will help the developing country diminish its reliance on exports and ease oversupply of photovoltaic panels – last year, solar stocks plunged as a supply glut contributed to a 20% plunge on the average price of solar panels.
“While the Chinese government is determined to boost the domestic market, it is not sufficient to eliminate oversupply,” Wang Xiaoting, a Beijing-based analyst, said in the article. “Panel prices will stay stable in 2013.”
Additionally, the Chinese government is providing tax breaks for solar companies to acquire, merge or reorganize their operations in an attempt to consolidate the industry.