Is the cleantech market rally over for now?

A new research report today from Banc of America Securities-Merrill Lynch puts a neutral outlook on its cleantech index, with sectors including wind projected to boom while solar could suffer in 2010.

The firm said its cleantech index outperformed the market average in the second quarter of this year, at 24 percent versus 15 percent. That was especially helped by geothermal at 35 percent and energy storage at 49 percent.

But that market rally could be over for now, as the index has seen a 6 percent drop in July alone, the report said, projecting disappointing earnings because of the delay in rolling out stimulus funds (see Tax flaw in U.S. stimulus hurts renewables and VCs evolve role in cleantech).

That delay is especially affecting the solar sector, with Banc of America Securities-Merrill Lynch analysts downgrading solar because of “severe oversupply issues” (see China solar market in late 2009 spells glut and Extra solar panels in Spain driving down prices). Analysts noted that there’s also a “risk that 2010 demand doesn't come back as much as the consensus expects even with government support.”

Solar joins fuels and water in the underweight category. Fuel companies performed at 61 percent in the second quarter, a circumstance the analysts referred to as “a dead cat bounce.”

The analysts were more optimistic about wind, upgrading it to overweight along with efficiency and storage plays. The report said the firm was confident demand for wind would improve in 2010.

The report noted that governments including China and India are mostly pro-renewables, a factor that is likely to help 2010 be a better year than 2009 (see China to spend $3B on cleantech pilot projects and Inside cleantech India: Kal, Aaj aur Kal!).

Earlier this year, the firm predicted that nuclear is starting to come back into vogue in the UK and U.S. (see Nuclear's biggest problem? Not enough scientists).

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