Solar power - question of subsidies So Warren Buffett has the hots for solar. This week he committed a further $2.5bn to the industry through his MidAmerican Energy Holdings. For the first time in a long time, he is not alone. Shares in solar-panel makers such as First Solar and SunTech have finally turned a corner, recovering in recent months from five-year lows. Never mind the fundamentals - SunTech, the world's biggest panel manufacturer, carries $1.6bn in net debt and is lossmaking, for example. Investors may expect brightening prospects. China, the solar market with the most potential, recently approved a huge number of installations for 2013, along with $1bn in new subsidies. In the US, where Mr Buffett is focusing his solar investments, the industry still benefits from tax credits, which will now extend to wind power following the fiscal cliff compromise. And the cost to install one watt of solar capacity, which has almost halved over the past five years to around $1.20, continues to fall. The shale gas revolution in the US has increased pressure for those costs to fall faster. That is all very well, but the world's panel makers remain in a bind. In spite of falling costs, they still need subsidies to stay afloat. Without consensus on the effects of carbon dioxide emissions on climate change, these subsidies will fluctuate. To the cost of solar installation must be added that of storage capacity - batteries - to ensure steady electricity supply. Only in countries such as Germany or Hawaii, with high power prices, does that final price of electricity from solar compete with that from the grid, notes industry consultancy GTM Research. And rock-bottom panel prices caused by a supply glut mean that most manufacturers will not return to profitability any time soon. Mr Buffett is probably in this for the long haul. Investors that are not are in for an Icarus moment.