Oil prices have recovered, climbing over $60 a barrel, the recent stock market rally has lured many investors back off the sidelines, and President Barack Obama’s clean energy agenda has breathed some life back into the browbeaten sector.

Now, solar energy stocks – some that lost more than two-thirds of their value last year – have come roaring back.

After topping $300 a share last spring, shares of First Solar Inc. (Nasdaq: FSLR) plummeted to just $85.28 a share in November. But since then the company has bounced back, soaring 125% to Friday’s close of $191.72 a share.  Shares of Trina Solar Ltd. (NYSE: TSL) hit $52 last summer before bottoming out at $5.61 in November. That stock is up more than 260% since Nov. 21.

Global economic growth is far from guaranteed at this early stage, but there’s good reason to believe that when a recovery does get underway, solar stocks will be shooting for the moon.

California’s Gold Standard

While many other solar energy companies have collapsed under the weight of the economic downturn, a small upstart out of California has managed to greatly expand its business.

That company is BrightSource Energy, which last week agreed to what the company’s Chief Executive Officer, John Woolard, called the “the largest solar deal in the world.”

Pacific Gas and Electric Co. agreed to purchase 1,310 megawatts (MW) of solar thermal power from BrightSource Energy for a sum that analysts’ believe tops $3 billion.

BrightSource had already agreed to transmit 900 MW of solar power to PG&E in a deal that analysts valued at $2 billion to $3 billion. The terms of the new deal, which expands upon the original 900MW agreement, will build on top of that figure.

BrightSource plans to build seven solar power plants in the Mojave desert of California that will use mirrors to direct sunlight onto a group of centralized water towers to create steam that will, in turn, power turbines. PG&E estimates that the amount of energy produced by the plants will be sufficient enough to power 530,000 homes.

Earlier this year, BrightSource signed a similar 1,300 MW agreement with Southern California Edison Co. – an indication that, despite economic hardship, the solar energy business is still hot.

But a lot of BrightSource’s recent activity has to do with California’s newly adopted state energy policy. In 2006, California passed a law that required electrical utilities to get 20% of their power from renewable sources by 2010.

However, on November 17, 2008, California Gov. Arnold Schwarzenegger took the state’s green energy mandate further by signing Executive Order S-14-08, which requires that utilities generate 33% of their power through renewable sources by 2020.

Indeed, the state of California has led the country in adopting renewable sources of energy, particularly solar.

Renewable energy accounts for 13.5% of the state’s energy consumption, and for the past three years, the California Energy Commission has been managing $400 million targeted for solar on new residential building construction. That includes an ambitious “Million Solar Roof” initiative that will create 3,000 megawatts of installed photovoltaic capacity by 2018.

But California is more than an energy pioneer. It’s an early indication of where U.S. energy policy is headed.

If President Barack Obama’s administration has its way, mandates similar to those issued in California will be employed across the country over the next 10 years. In fact, they already are.

Solar Shift

Obama announced Tuesday that he is making California’s standard for vehicle fuel efficiency and greenhouse gas emissions the new national standard.

Under Obama’s new proposals, vehicles would be 30% cleaner and more fuel efficient by 2016. And that’s just the beginning.

The President’s budget incorporated $646 billion in revenue from capping global-warming pollution, while allocating $150 billion to renewable energy investment over the next 10 years, making his green-funding initiative the largest such effort in U.S. history.

Among other things, Obama’s recent stimulus package provides a tax credit of up to 30% for home solar installations.

The Obama administration also advocates a policy that would require 25% of U.S. electricity demand be met by renewable energy by 2025. The President has the support of the Democrat-led Congress. U.S. Sen. Jeff Bingaman, (D – N.M.), Chair of the Senate Energy and Natural Resources Committee, is working on legislation that aims to make 20% of U.S. energy demand renewable by 2021.

While a renewable energy policy was largely neglected by the administration of George W. Bush, Obama’s effort can hardly be described as partisan. It is more representative of a shift in political ideology that arose when gas prices soared above $4 per gallon last summer.

A recent Gallup Poll showed that the majority of Americans support higher fuel efficiency standards such as those Obama announced Tuesday. In March, 80% of Americans said they favored higher fuel efficiency standards for automobiles.

Currently, just 28 states have renewable energy goals, but with the Obama administration’s effort and a shift in public opinion, it won’t be long before all 50 are enacting their alternative energy mandates.

According to a study by Allianz Global Investors, 78% of investors think green technology could be the “next great American industry,” and 97% of investors believe the development of alternative fuel sources will remain important even if oil prices remain relatively low.

And statistics bear that out. Venture capitalists invested $4.1 billion in alternative energy projects in 2008 – a 54% increase from the year prior, according to a report by PricewaterhousCoopers. What’s more, 45% of that money went to solar projects, compared to 23% in 2007.

“Alternative energy’s rise isn’t going to be smooth, but it’s going to be one of the great new growth industries,” Steven Berexa, managing director of research for RCM Informed, an Allianz subsidiary, told Kiplinger’s Personal Finance magazine.

A Global Industry

In addition to the United States, solar energy is gaining traction around the world.

After subsidizing 2,400 MW of solar projects last year, the Spanish government will subsidize an additional 500 MW this year. Japan aims to create more than 100,000 new jobs in its solar industry as part of an effort to jumpstart its flailing economy. Proposals for solar energy plants are also being considered in the Middle East and northern Africa.

Even BrightSource’s Woolard has attributed some of his company’s success to its overseas operations.

“PG&E looked hard at what we’d done,” Woolard told The San Francisco Chronicle. “They looked at the results from our plant in Israel, and that built a lot of confidence that we were meeting milestones and delivering.”

Most recently, Australia announced plans to build a solar power station that will rival BrightSource’s Southern California operation. The network is expected to produce about 1,000 MW of energy, but won’t be operational until at least 2015.

“We don’t want to be clean energy followers worldwide, we want to be clean energy leaders worldwide,” Prime Minister Kevin Rudd told the Financial Times.

The Australian government hopes renewable energy will account for 20% of the country’s power grid by 2020. Rudd said the government intends to spend about $1 billion (A$1.4 billion) of the $3.6 billion (A$4.7 billion) it has pledged to clean energy initiatives over the next decade.

Like in the United States, the Australian government hopes its alternative energy initiative will be a catalyst for private investment. John Connor, head of the Sydney-based Climate Institute, told the FT that Australia’s clean energy plan will drive an estimated $15.5 billion (A$20 billion) in private investment.

Another country with an ambitious solar agenda is China. A country with notoriously high greenhouse gas emissions, China installed about 50MW of solar capacity last year, more than double the 20 MW in 2007, Renewable Energy World reported.

Beijing plans to expand the installed capacity to 1,800 MW by 2020, as the demand for new solar modules in China could be as high as 232 MW each year from now until 2012.

China is also a good place to find promising solar companies. LDK Solar Co. Ltd. (NYSE ADR: LDK), Yingli Green Energy Holding Co. Ltd. (NYSE ADR:YGE), and JA Solar Holdings Co. Ltd. (NYSE ADR: JASO) have all been beaten down by the market, but could post a strong rebound when China’s solar initiative takes full flight.

Many analysts also like the aforementioned First Solar and Trina Solar Ltd., which stand a better shot of withstanding the recession because of their size and experience.

[Editor’s Note: Money Morning Investment Director Keith Fitz-Gerald is the editor of the new Geiger Index trading service. As the whipsaw trading patterns investors have endured this year have shown, the ongoing global financial crisis has changed the investment game forever.

Uncertainty is now the norm and that new reality alone has created a whole set of new rules that will help determine who profits and who loses. Investors who ignore this “New Reality”will struggle, and will find their financial forays to be frustrating and unrewarding. But investors who embrace this change will not only survive – they will thrive. With the Geiger Index, Fitz-Gerald has already isolated these new rules and has unlocked the key to what he refers to as “Golden Age of Wealth Creation” The Geiger Index system allows Fitz-Gerald to predict the price movements of broad indexes, or of individual stocks, with a high degree of certainty. And it’s particularly well suited to the kind of market we’re all facing right now. Check out our latest report on these new rules, and on this new market environment.

Source: Is the Dark Cloud Over Solar Energy Beginning to Break?

This from the editors at Investment U:

In the news this morning, Trina Solar (NYSE: TSL) announced that fourth quarter revenues would beat expectations.

It’s an unexpected bit of data when many were starting to count the solar sector out – and not for good reason. After our last energy crisis, many alternative energy producers, like solar, were simply forgotten about when gas prices came back down.

With the average price per gallon at around $1.96, who could blame them if they expected the same thing to happen? But the interesting thing is that it hasn’t.

Trinity Solar follows news from Suntech Power (NYSE: STP), the world’s largest solar module producer, that it expects production to increase – almost 60%. That’s quite the opposite of a drop-off.

Granted, there are just as many solar losers, as winners. Canadian Solar (Nasdaq: CSIQ) reported negative numbers along with a number of others, from Applied Materials (Nasdaq: AMAT), JA Solar Holdings (Nasdaq: JASO) and GT Solar International (Nasdaq: SOLR).

But the fact that we are seeing resilience form the solar sector and companies holding their own, means that this time around might be a little different than last. And that’s a good signal for us to keep our eyes on solar.

Because any strength in this market is impressive, regardless of where it is.

Source: Sun Still Shines on Trina Solar (TSL)

The putrid haze of Beijing that has engulfed China and greater Asia is reducing the amount of sunlight that actually reaches the ground, according to a new report from the United Nations Environment Program.

In addition to being responsible for millions of deaths and blighted crop yields, these so-called Atmospheric Brown Clouds (ABCs) have dimmed China’s skies to the extent that the country’s solar initiative, and its huge solar industry, could become DOA.

As it stands now, Chinese solar stocks are on life support — depleting the portfolios of investors who got in at the top of the China IPO solar bubble of 2006-2007.

The losses have been staggering…

Solarfun Power Holdings Co. (Nasdaq:SOLF) has a 52-week range of $4.20 – $40.19 – a drop of 89.5%

Trina Solar Ltd. (NYSE:TSL) fell from 56.50 to 8.51 over the past 52 weeks – for a loss of 84.9%.

Suntech Power Holdings (NYSE:STP) saw it’s 52-week price plunge to $9.53 from $90.00 – a loss of 89.4%

And JA Solar Holdings, Co., Ltd. (Nasdaq:JASO) fell from $27.00 to 2.01 over the past 52 weeks – a loss of 92.5%.

In a conference call to analysts on Nov. 12th, JA Solar CEO Samuel Yang said “At this moment the market reaction has been panic.”

Now it appears that China’s home market for solar products is facing a very dim future as well from decades of pollution.

ABCs reflect solar radiation back to space by absorbing heat in the atmosphere.

In China, ABCs can cut sunlight on the Earth’s surface in two ways. Fossil-fuel particles such as sulphates reflect and scatter rays back into space, while black carbon in soot, absorbs sunlight before it reaches the ground.

According to the report, smog blocks 10-25% of the sunlight that should be reaching terra firma in China.

This isn’t just a thin layer of pollution blocking out the sun. In some places, it can be a mile thick. It can stretch from the Arabian Peninsula to the Yellow Sea, sometimes drifting as far east as California.

The U.N report says “In China the observed dimming trend from the 1950s to the 1990s was about 3-4 per cent per decade, with the larger trends after the 1970s.”

What does this mean for investors?

Those of you who tend to be bottom feeders should stay away from China solar stocks at any price. As we all know, when it comes to stock markets nothing is permanent. But zero is the share price we could be looking at for some these fallen IPO stars.