The solar industry is on the brink of a sustained period of momentum, according to a bullish research note by Deutsche Bank published on Wednesday.

The report predicts that a re-balance in the supply and demand of polysilicon, the growth of new markets and stablising module prices will make 2014 a pivotal year in the industry’s development.

“We believe the solar sector is at an inflection point and industry fundamentals are likely to improve further into 2014,” states the report.

“The sector has passed the tipping point for grid parity in more than ten major markets worldwide and will likely maintain this momentum even with elevated poly prices. As module prices stabilise around $0.60-$0.70/W, levelised cost of solar electricity without subsidies is now 10-20c/kWh in several major regions of the world. Rising electricity prices, a need for competitive generation sources and lowered balance of system costs will drive further improvement over the next several years.”

According to the research note, demand for polysilicon could outstrip supply by 2014 with the glut of polysilicon swallowed up and much production capacity, particularly in China, going offline.

The bank predicts a rise in module prices levelling off at around US$0.70 per Watt due to the impact of tariffs on Chinese cells entering Europe in the third quarter of 2013 and the levies on Taiwanese products entering the US.

Many large PV manufacturers have seen their share prices shoot upwards during the past month and Deutsche bank expects this to continue. 

“Despite the strong year-to-date performance, we believe the solar rally has legs. Demand outlook is improving due to strong demand from Japan, China, US and other emerging markets. The supply situation is also a lot better in our view – Chinese tier two/three supply cuts have accelerated over the past 18 months and supply from large Chinese companies such as STP, LDK has decreased sharply, particularly in markets outside of China,” it predicts.

“With the potential resolution of EU/US/China tariff uncertainty, we expect relatively stable pricing, improving margins and further sector consolidation to drive gradual profitability improvement, which in turn could act as the next set of catalysts for solar stocks.”

Bloomberg New Energy Finance has also expressed optimism about solar share prices.

This article originally appeared in PV-Tech, Solar Power Portal’s sister site.