Solar stocks from all over the world are soaring today after China announced that it will dramatically increase the amount of solar power it uses every year. The move may help solar panel makers move their current inventory and boost their profits.

solar stocks

China goes solar

A statement posted on the Chinese government’s website indicates that the plan is to increase its solar power by 10 gigawatts every year for the next three years. Bloomberg reports that by the end of the three years, China’s solar capacity will have risen five times to over 35 gigawatts installed.

The price of solar panels has fallen 20 percent over the past year because of an oversupply in the industry, so this dramatically increased demand should serve to eat into that glut. However, Bloomberg New Energy Finance analyst Wang Xiaoting doesn’t believe the increased demand will eliminate that oversupply. The analyst predicts that the price of solar panels will simply remain stable this year.

Solar stocks affected by China’s plans

After China made the announcement, shares of LDK Solar Co., Ltd (NYSE:LDK) rose as much as 17 percent at the New York Stock Exchange while Daqo New Energy Corp (NYSE:DQ) jumped 4 percent. JinkoSolar Holding Co., Ltd. (NYSE:JKS) shares climbed 16 percent, and shares of Trina Solar Limited (NYSE:TSL) rose 12 percent.

SunPower Corporation (NASDAQ:SPWR) shares received a 4 percent boost from the news, while Sunedison Inc (NYSE:SUNE) jumped 10 percent. Yingli Green Energy Hold. Co. Ltd. (NYSE:YGE) rose 9 percent, Canadian Solar Inc. (NASDAQ:CSIQ) surged 15 percent and Suntech Power Holdings Co., Ltd. (NYSE:STP) shares rose as much as 15 percent. Shares of Enphase Energy Inc (NASDAQ:ENPH) and First Solar, Inc. (NASDAQ:FSLR) each jumped 6 percent.

China’s solar expectations analyzed

Deutsche Bank analyst Vishal Shah issued reports to investors right before and right after the Chinese government made the announcement. After meetings at Intersolar, he said he continued to see positive momentum for most solar stocks, particularly Sunedison Inc (NYSE:SUNE) and Enphase Energy Inc (NASDAQ:ENPH). He also said he expects Chinese solar stocks to outperform their North American peers like SunPower Corporation (NASDAQ:SPWR) and First Solar, Inc. (NASDAQ:FSLR).

After China made the announcement, he noted that the nation had nudged its official upward “several times” over the last two or three years. He believes the government’s continued commitment will “support the larger players while removing the uncompetitive tier 2-3 supply.

Consolidation expected among solar companies

In general, Shah sees a general improvement in the business climate for solar companies which have the “technology and capacity.” He said Yingli Green Energy Hold. Co. Ltd. (NYSE:YGE) has greater Chinese exposure, although Trina Solar Limited (NYSE:TSL) is expanding its domestic capabilities and will benefit if the industry consolidates as is expected. The statement from the Chinese government did say that officials would offer tax breaks to solar companies which acquire others, merge or reorganize. It also indicated that China would work on resolving trade disputes with the European Union.