The solar energy market has been one of the darlings in the first half of 2013, with companies like SolarCity Corp (NASDAQ:SCTY), Real Goods Solar, Inc. (NASDAQ:RSOL) and SunPower Corporation (NASDAQ:SPWR) more  more than doubling in value since the start of the year. Headwinds have risen, however, as European regulators move to block certain trade practices emerging from China that might harm the market.

Solar Energy China

A new report, authored by KGI’s Jennifer Liang, considers the impact of the growing tension between China and Europe and concludes that the future of solar is mixed going ahead. The analysis does not anticipate the kind of drop off in demand for solar panels that occurred after regulators made a similar rule against Chinese panel dumping.

Chinese solar panel wars

Back at the beginning of June European regulators made their preliminary ruling concerning Chinese solar panel dumping. The continent’s trade body decided that China was indeed flooding Europe with cheap solar panels, and threatened to place tariffs and duties on the panels. China responded with similar threats, leaving the two economic powerhouses at loggerheads. A deal in the works suggests the two will avoid a trade war, but minimum prices will  be placed on Chinese panels.

The real demand problem in Europe isn’t the rising price of solar panels, however, it’s the uncertainty about demand in Europe as a whole. The continent is seriously depressed, and very few countries are in a position to offer significant subsidies to solar power. The situation across the Atlantic isn’t getting any better.

China committed to going solar

Balancing the problems in Europe, China is likely to pick up a certain amount of the lost demand. The country’s government is pushing renewable energy development, incorporating it into various schemes and including it as a major prong of its latest five year plan. China is going solar, and that’s a bright spot for the international solar industry.

The second quarter of the year is likely to see some of the best results from solar companies in recent years. The third quarter, currently underway, is more uncertain as it will rely on the outcome of the EU-China negotiations and the general economic well-being in Europe. The analyst does not believe that the uncertainty will lead to large losses, however. Solar is likely to be solid as Chinese demand continues to expand.